As Wall Street struggles with the possibility that high interest rates will remain in place until the Federal Reserve reduces inflation, stocks extended their slide from late August with more losses on Tuesday.
The S&P 500 lost 44 points, or 1.1%, to finish at 3,986, for a loss of 5.1% over the previous three days. With just one day remaining in August, the benchmark index is down 3.5% for the month.
The Nasdaq composite shed 1.1%, while the Dow Jones Industrial Average fell 1%. Stocks of smaller companies decreased as well, lowering the Russell 2000 by 1.5%.
Since Federal Reserve Chairman Jerome Powell said on Friday that the U.S. central bank would adhere to a plan of rate rises to tame inflation, which is near multi-decade highs, the market has been lackluster. That seemed to put an end to any speculation that the Fed may loosen up in response to indications that economic growth is weakening.
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On Tuesday, a few equities defied the general trend. One such company was Best Buy, which finished the day up 1.6% after releasing third-quarter numbers that were far stronger than analysts had predicted. The stock prices of other shops increased as a result.
The value of energy firms declined along with the price of crude oil.
The Fed is committed to bringing inflation down.
Chris Turner of ING said in a research that weaker consumer spending and declining stock prices “are not enough to blast the Fed off its tightening path.”
Investors are concerned that rate increases from the Fed and central banks in Europe and Asia might halt global economic expansion.
Fed policymakers cite the robust employment market in the United States as proof that the largest economy in the planet can withstand higher borrowing prices. Some claim that even if a recession is conceivable, it could be required to stop the inflation from spiraling out of control.
This year, the Fed has increased interest rates four times. Three times its average margin, the most recent two were 0.75 percentage points apart.
Some investors had thought that if inflation declined, the Fed would loosen off. Stock prices rose in early July and late July as a result of this feeling.
Investors anticipate another significant rate rise at the Fed’s September meeting, but the possibility of one this size is diminished in light of July retail sales that were worse than anticipated.
While other data indicates that consumer spending slowed last month, the Fed’s favorite inflation indicator slowed considerably. This week, Wall Street will get a number of more economic reports.
In the oil sector, the New York Mercantile Exchange’s electronic trading saw benchmark U.S. crude drop $2.89 to $94.12 a barrel. On Monday, the contract increased $3.95 to $97.01. The benchmark price for international trade, Brent oil, dropped $2.92 to $101.01 per barrel in London. The prior session saw a $4.10 increase to $105.09.