By Stephen Culp
NEW YORK, June 21 (Reuters) – Wall Street extended its sell-off on Wednesday as U.S. Federal Reserve Chairman Jerome Powell’s congressional testimony reinforced the central bank’s campaign to rein in inflation as he hinted at the likelihood of further interest rate hikes.
All three major U.S. stock indexes were on track to notch their third straight daily declines, with interest rate sensitive momentum stocks weighing the tech-laden Nasdaq down most.
Tesla Inc TSLA.O, along AI-related stocks such as Microsoft Corp MSFT.O and Nvidia Corp NVDA.O were the heaviest drags.
In his testimony before the U.S. House Financial Services Committee, Powell reiterated the fact that the central bank remains “strongly committed to bringing inflation back down to our 2% goal,” and said it would be “a pretty good guess” that future rate hikes are in the cards if the economy continues on its current path.
“Powell is not going to diverge from what he said at the press conference last week; the Fed is going to be hawkish until inflation reaches 2%,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “The Fed is keeping this tough talk going because they don’t want the markets to get over enthusiastic.”
At last glance, financial markets have priced in a 79% likelihood of another 25 basis point interest rate hike at the conclusion of July’s monetary policy meeting, according to CME’s FedWatch tool.
At 2:00PM ET, the Dow Jones Industrial Average .DJI fell 17.9 points, or 0.05%, to 34,035.97, the S&P 500 .SPX lost 13.67 points, or 0.31%, to 4,375.04 and the Nasdaq Composite .IXIC dropped 124.88 points, or 0.91%, to 13,542.41.
Among the 11 major sectors of the S&P 500, energy stocks .SPNY led the gainers, rebounding from its biggest daily plunge in over a month. Communication services .SPLRCL and tech .SPLRCT suffered the largest percentage drops.
Tesla Inc TSLA.O was the biggest drag on the S&P 500 and the Nasdaq, sliding 4.6%. Barclays downgraded its rating on the stock to “equal weight” from “overweight,” saying the electric automaker’s recent rally was too sharp relative to fundamentals.
Package delivery firms FedEx FDX.N and United Parcel Service Inc UPS.N dropped 2.7% and 2.1%, respectively, after FedEx posted disappointing quarterly earnings and said waning global demand is pressuring its profit margins.
Crypto firms, including Coinbase COIN.O, Riot Platforms RIOT.O, Marathon Digital MARA.O and Bit Digital BTBT.O, gained between 1.6% and 5.2%, as Bitcon BTC=BTSP breeched the $30,000 level.
Declining issues outnumbered advancing ones on the NYSE by a 1.01-to-1 ratio; on Nasdaq, a 1.31-to-1 ratio favored decliners.
The S&P 500 posted 14 new 52-week highs and no new lows; the Nasdaq Composite recorded 67 new highs and 104 new lows.
(Reporting by Stephen Culp; Additional reporting by Shubham Batra, Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Aurora Ellis)
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