Wall St falls more than 1% on fears of an aggressive Fed

  • Megacap Growth, Tech Stocks Extend Losses
  • Amazon and UnitedHealth among bidders for Signify – report
  • AMC slumps as UK’s Cineworld plans to file for bankruptcy
  • Indices down: Dow 1.18%, S&P 1.41%, Nasdaq 1.67%

Aug 22 (Reuters) – Wall Street’s major indexes fell more than 1% on Monday in a lackluster start to the week as investors worried about hawkish signals from Federal Reserve policymakers amid slowing economic growth .

All 11 major sectors of the S&P 500 fell in early trading, with rate-sensitive stocks of information technology (.SPLRCT), consumer discretionary (.SPLRCT) and communication services (.SPLRCL) among the main losers.

High-growth companies such as Apple Inc (AAPL.O) and Tesla Inc (TSLA.O) fell 1.4% and 2.4%, respectively.

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A four-week summer rally for the Nasdaq and S&P 500 erupted last week after growth stocks fell as the benchmark 10-year Treasury yield hit nearly 3% on inflation fears.

Banks (.SPXBK) fell 2.1% on Monday, with lenders JPMorgan Chase & Co (JPM.N) and Bank of America (BAC.N) down nearly 2% each.

Banking giants collectively face more than $1 billion in regulatory fines for employee use of unapproved messaging tools, including email and apps such as WhatsApp. Read more

The CBOE Volatility Index (.VIX), Wall Street’s fear indicator, rose to 23.26, its highest level in more than two weeks.

Hopes of a dovish pivot from the Fed and strong quarterly earnings helped the benchmark S&P 500 index (.SPX) rebound nearly 14.5% from its mid-June lows after a difficult start to the year.

This week, the focus is on Fed Chairman Jerome Powell’s speech at a central bankers’ conference in Jackson Hole on Friday to elicit further clues on the trajectory of monetary policy tightening.

“The market convinced itself that last month’s CPI suggested inflation had peaked…but that was short-sighted,” said Kenny Polcari, managing partner at Kace Capital Advisors.

“Jackson Hole will give Powell the opportunity to reset the narrative and suggest the Fed is going to remain vigilant and aggressive.”

The Fed will raise rates by 50 basis points (bps) in September, according to economists polled by Reuters. Read more

Traders are also expecting a slightly higher likelihood of a 50bps hike from a third 75bps hike, even as several policymakers pushed back on expectations of a dovish pivot and warned. focused on fighting inflation.

Investors will also be looking for details on the Fed’s plans to shrink its balance sheet by nearly $9 trillion, a process that began in June. Read more

The Fed’s favorite inflation indicator, the PCE price index, will also be released this week.

Investors hungry for clues about the strength of the economy amid growing fears of a recession will also be closely watching flash readings on business activity, the second estimate of second-quarter GDP and consumer sentiment for the University of Michigan.

As of 9:39 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 397.64 points, or 1.18%, at 33,309.10, the S&P 500 (.SPX) was down 59.65 points, or 1.41%, to 4,168.83, and the Nasdaq Composite (.IXIC) was down 212.19 points, or 1.67%, to 12,493.03.

Slowdown fears also stunned markets globally. China’s central bank cut some key rates on Monday in a bid to support a slowing economy and struggling housing sector. Read more

Signify Health Inc (SGFY.N) jumped 37.8% following a report on Sunday that UnitedHealth Group Inc (UNH.N), Amazon.com Inc (AMZN.O), CVS Health Corp (CVS .N) and Option Care Health Inc (OPCH.O) were candidates to acquire the company. Read more

AMC Entertainment Holdings Inc (AMC.N) fell 36.6% after the US cinema chain’s preferred shares began trading and its British rival Cineworld Group (CINE.L) warned of a possible filing balance sheet. Read more

Falling issues outnumbered advances for an 8.41-to-1 ratio on the NYSE and a 4.21-to-1 ratio on the Nasdaq.

The S&P index recorded a new 52-week high and 29 new lows, while the Nasdaq recorded 13 new highs and 78 new lows.

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Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila

Our standards: The Thomson Reuters Trust Principles.

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