Inflation, Rate Hike Fears Weigh on Stocks

The S&P 500 and Nasdaq Composite fell today, driven by renewed worries over the Federal Reserve’s interest rate trajectory and speculation about another rate hike this year.

The Nasdaq, with its tech-heavy portfolio, declined for the fourth consecutive day, shedding 1%. Meanwhile, the S&P 500 dipped by 0.3%. On the flip side, the Dow Jones Industrial Average managed to gain 67 points, marking a 0.2% increase.

Apple’s stock value took a hit, dropping 3% following a Bloomberg News report suggesting that China is considering expanding its iPhone ban in state-owned enterprises and agencies. Other tech and semiconductor stocks, including Tesla, Nvidia, and Advanced Micro Devices, also saw declines, each dropping over 2%.

Today’s economic data, which included jobless claims lower than anticipated, added to concerns. The robust labor market might prompt the Federal Reserve to reconsider its current monetary policy. Specifically, weekly jobless claims were reported at 216,000, contrasting with the 230,000 Dow Jones had projected. Additionally, labor costs for the second quarter exceeded expectations.

Chris Zaccarelli, the Chief Investment Officer at Independent Advisor Alliance, commented on the situation:

“There was optimism that the Fed would remain static for the remainder of the year. However, the market might witness one or two more rate hikes. Given the circumstances, this could be a slight setback for the stock market, which had hoped the Fed’s rate adjustments were finished for the year.”

In addition to monitoring the Federal Reserve’s moves, traders are also sifting through recent corporate earnings reports. Notably,’s stock plummeted by 12% after it reported a gross margin below expectations for the recent quarter. Similarly, ChargePoint Holdings saw a 17% decline after missing revenue projections.

Following a downturn in the previous session, major U.S. stock benchmarks are under pressure. This is due to rising Treasury yields impacting tech stocks and increasing concerns that the Federal Reserve might leverage recent robust economic data to justify more rate hikes.

Despite the majority of interest rate traders predicting no changes in the upcoming September Federal Open Market Committee meeting, the likelihood of an additional rate hike in November has increased to 45%, as indicated by the CME Group’s FedWatch tool.

Copper prices have dipped to their lowest since late August, too, as recession fears rise. The metal’s price recently hit $3.739 per pound, a rate not observed since August 25. Given its diverse applications, from construction to electronics, copper is often viewed as an economic barometer.

Two ETFs centered on clean energy experienced significant lows today as well. The Invesco Solar ETF saw a near 3% decline, reaching its lowest since September 2020. Concurrently, the iShares Global Clean Energy ETF decreased by over 1%, marking its lowest point since August 2020.

Former St. Louis Federal Reserve President, James Bullard, highlighted the possibility of persistent high inflation leading to more interest rate hikes. In a recent CNBC interview, Bullard emphasized that inflation rates need to decrease to the 3% range and eventually to 2%. If inflation remains elevated, Bullard said that the Federal Reserve might need to take further action.

That’s not a surprise given Bullard’s notoriety as one of the Fed’s biggest hawks, but his interview today provided traders with a sobering reminder that central bankers still aren’t happy with inflation. What’s more, a resurgence in inflation – likely driven by marauding oil prices – could force the Fed’s hand. That’s the last thing bulls – tech bulls, in particular – want to see, and it’s why the market may be destined to fall further as oil continues to climb.


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