The S&P 500 and Nasdaq Composite fell Thursday as concerns resurfaced over the Federal Reserve’s interest rate policy path, and whether policymakers will enact another hike this year.
The tech-heavy Nasdaq fell for a fourth day, losing 0.8%, while the broad-based S&P slipped 0.2%. The Dow Jones Industrial Average bucked the selloff, adding 78 points, or 0.2%.
“People were hoping the Fed would be on hold for the rest of the year, but it’s possible that we got one or two more rate hikes to come,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “All things being equal, that’s a little bit of a negative for the stock market, which was expecting the Fed to potentially be done for the year.”
Apple shares dropped 3% on a Bloomberg News report that China’s looking to broaden a ban on the use of iPhones in state-owned companies and agencies. Technology and semiconductor stocks lagged, with Tesla, Nvidia and Advanced Micro Devices last down more than 2% each.
A series of economic data points Thursday — including fewer-than-expected jobless claims — contributed to fears that the still strong labor market may make the Federal Reserve think twice about relaxing its tight monetary policy stance. Weekly jobless claims came in at 216,000, versus the 230,000 expected by Dow Jones, while second-quarter labor costs rose more than anticipated.
Combined with the recent uptick in energy prices, a strong jobs market will boost the need for the Fed to act and potentially approve more hikes, Zaccarelli said.
While 93% of traders pricing in a rate pause at September’s Federal Open Market Committee meeting, futures hikes aren’t off the table. Expectations for an additional increase in November have risen to 45%, according to the CME Fed Watch tool.
Traders also combed through the latest corporate earnings reports. C3.ai slid 14% after reporting lower-than-expected gross margin in the recent quarter, while ChargePoint Holdings plunged 13% after missing revenue estimates.