Dow, Nasdaq, S&P 500 end lower for fourth consecutive session

Markets React To Latest Employment Data

Spencer Platt/Getty Images News

Stocks recorded their fourth consecutive day of losses on Monday, as investors continued to moderate their hopes that the Federal Reserve would pull back on its plan to raise interest rates. An afternoon rebound took the major U.S. equity averages off their lows of the session (and briefly saw the Dow tick into positive territory), but the recovery fizzled headed into the close.

The Nasdaq (COMP.IND) is -1.0%, the S&P (SP500) is -0.8% and the Dow (DJI) is -0.3%.

The Dow Jones closed at 29,202.88, a decline of 93.91 points. The S&P 500 retreated 27.27 points to end at 3,612.39, while the Nasdaq tumbled 110.30 points to finish at 10,542.10.

Seven of the 11 S&P sectors finished lower. Info Tech was among the weaker groups, dropping as semiconductor stocks struggled due to rules restricting China shipments. Energy was another standout decliner, falling by more than 2%.

The major U.S. equity averages rallied sharply early last week on optimism that the Fed might be ending its interest rate increases sooner than previously expected. However, this view came under scrutiny as the week wore on, culminating in a substantial decline on Friday.

Monday’s early selling had the S&P 500 testing important support at the 200-week moving average, which sits at 3,594. The index reached an intraday low of 3,588.10 before bouncing back — remaining just off a 52-week low of 3,585.62.

Looking ahead, Seeking Alpha contributor Mike Zaccardi said, “All eyes will be on Thursday’s CPI report and the kick-off of the third-quarter earnings season later this week. Bulls hope for a cool inflation print so that the interest rate market and U.S. dollar calm. Volatility remains high with the VIX closing above 32.”

Zaccardi attributed some of the day’s selling to bearish comments from JPMorgan CEO Jamie Dimon, who predicted that the U.S. will tip into a recession within the next six to nine months. Dimon also warned that markets could get “disorderly” with volatility rising.

With the Columbus Day holiday, the bond market was closed and there were no economic indicators on the calendar.

However, investors did receive another round of commentary from a Fed official. Continuing the central bank’s hawkish rhetoric, Federal Reserve Vice Chair Lael Brainard cautioned that policy might need to remain restrictive “for some time” as the impact of higher interest rates makes its way through the system.

“It will take time for the cumulative effect of tighter monetary policy to work through the economy broadly and to bring inflation down,” she said at an event hosted by the National Association for Business Economics.

Looking at the days ahead, Deutsche Bank’s Jim Reid agreed that Thursday’s CPI report represents the centerpiece of the week.

“Over the last few months Fed expectations have generally risen with this number and markets have consistently sold off,” he noted. “However there have been a few strong counter-trend rallies on either the perception of a coming Fed pivot or on hopes of being near peak inflation. All have so far been ultimately reversed but the potential for Thursday to dominate the next few weeks of trading is high.”

Among active stocks, Ford showed a notable decline following its China sales numbers and a downgrade.

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