Stocks fell for a fourth straight day on Wednesday, the last day of August, putting the summer market comeback in doubt as investors weighed the Federal Reserve’s inflation-fighting efforts.
The Dow Jones Industrial Average slid 280.44 points, or nearly 0.9%, to 31,510.43. The S&P 500 lost roughly 0.8% to end the day at 3,955.00, and the Nasdaq Composite fell about 0.6% to 11,816.20. The major averages were higher earlier in the day.
What began as a strong month for the three major averages ended on a weaker note. The Dow finished August down nearly 4.1%, while the S&P and Nasdaq posted monthly losses of 4.2% and 4.6%, respectively.
The moves put the Dow and S&P 6.3% and 8.7%, respectively, above their mid-June intraday lows. The Nasdaq is now 11.8% above its low. The summer rally peak came two weeks ago on Aug. 16, a full two months after the mid-June bottom.
Investors had been debating for weeks whether the economy is in a recession or heading toward one, and many thought an economic downturn would give the Fed reason to ease up on its rate hiking plan. Fed Chair Jerome Powell reiterated in his Jackson Hole speech Friday, however, that the central bank is committed to curbing inflation and will continue to raise rates even in a recessionary environment.
“Markets were counting on limited rate increases and quick rate cuts,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “The speech was clear, however, that the increases will be larger, and the cuts more delayed, than anyone expected.”
Powell’s comments sparked a sell-off in stocks. Further, Cleveland Fed President Loretta Mester said Wednesday that she sees benchmark interest rates rising above 4% by early next year. On Tuesday, New York Fed President John Williams called for “somewhat restrictive policy to slow demand.”