Market Snapshot: Nasdaq closes at 2-year low after stocks fail to shake off Fed rate-hike gloom



U.S. stocks finished with losses on Monday, sending the Nasdaq Composite to its lowest close in more than two years, after investors failed to shake off worries about further Federal Reserve rate hikes and JPMorgan Chase & Co.’s Jamie Dimon warned of a potential 20% decline in the S&P 500.

How stocks traded
  • The Dow DJIA, -0.32% closed down by 93.91 points, or 0.3% at 29,202.88.
  • The S&P 500 SPX, -0.75% finished down by 27.27 points, or 0.8%, at 3,612.39.
  • The Nasdaq Composite gave up 110.30 points, or 1%, to end at 10,542.10 — the lowest close since July 28, 2020.

Monday’s declines exacerbated losses which occurred at the end of last week. On Friday, the Dow fell 630 points, or 2.1%, the S&P 500 declined 2.8%, and the Nasdaq Composite dropped 3.8%. The Nasdaq Composite was down 31.9% for the year to date through Friday.

What drove markets

Soft data a week ago had raised hopes that the Fed would soon pause its monetary tightening cycle in its battle to suppress multidecade high inflation, and the market subsequently rebounded off its near two-year lows. But a strong jobs report on Friday crushed that Fed “pivot” narrative and stocks plunged again.

On Monday, the CBOE Vix index VIX, +3.48%, a gauge of expected S&P 500 volatility, sat at 32.15, well above its long-term average of 20.

“The low interest-rate environment forced investors to chase yield and bid up the asset prices too high. Eventually the market is fair and asset values have to achieve some sense of common ground or base level valuation. So it was inevitable that this valuation correction would happen,” said Siddharth Singhai, chief investment officer for New York-based hedge fund IronHold Capital.

“Panic will swing the market towards excessive pessimism and then the valuations will be too cheap. That hasn’t happened yet. Upcoming rate hikes will most likely be a catalyst for panic, however,” he wrote in an email to MarketWatch on Monday.

Coming into Monday’s session, trading had been expected to be somewhat thinned by the Columbus Day and Indigenous People’s Day holiday, which closed the Treasury market.

Now, traders are looking toward more data later in the week for further guidance on Fed thinking and equity valuations. The U.S. producer price numbers will be released on Wednesday and the consumer prices report on Thursday, the last of their kind before the Fed’s policy decision on Nov. 2.

Then on Friday, third-quarter corporate earnings season really kicks into gear when big banks like JPMorgan

JPM, -0.93%

and Citigroup

C, -1.40%

present their numbers.

Read: JPMorgan, Citi, Morgan Stanley and Wells Fargo kick off bank earnings season in choppy waters and S&P 500 would be in an ‘earnings recession’ if not for this one booming sector — but that may not last long

Investors were also keeping an eye on the strong U.S. dollar, which is considered a drag on the earnings of U.S. multinationals. The dollar index

DXY, +0.34%

rose 0.3% to 113.12 as the euro intermittently broke below $0.97 after Russia sent missiles into cities across Ukraine.

See: A rampaging U.S. dollar is wreaking havoc in financial markets. Here’s why it’s so hard to stop it.

“We expect a lot more volatility in markets for the remainder of the year as the inevitability of higher rates sinks in and the economic consequences become more pronounced,” said Arthur Laffer Jr., president of Nashville-based Laffer Tengler Investments. Fed Chairman Jerome Powell “will not be a very popular person but it seems his legacy is focused on fighting any resurgence of 1970s inflation in the U.S. at all costs.”

Companies in focus
  • Rivian Automotive Inc. RIVN, -7.28% intends to recall about 13,000 vehicles due to a possible safety issue that has so far been found to have affected several units, the company said Friday night. Shares finished down by 7.3%.
  • Tesla Inc. TSLA, -0.05% reported record monthly sales of China-made electric vehicles in September, as it continues to ramp production in the world’s number-two economy. The electric-vehicle maker delivered 83,135 EVs from its Shanghai plant in September, an 8% rise from August, according to a report by the China Passenger Car Association. Tesla shares nonetheless finished down by less than 0.1%.

— Jamie Chisholm contributed to this article.

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