NEW YORK: Wall Street stocks dropped on Monday (Nov 5) after better-than-expected US services data added to worries that the Federal Reserve (Fed) will prolong its aggressive policies to counter inflation.
The Institute for Supply Management's services index rose to 56.5% last month, well above the 50% threshold indicating growth and pointing to strong business activity despite efforts to cool the economy.
The report comes on the heels of Friday's employment data, which also topped estimates.
“Today is a bit of a response to Friday, because that jobs report, showing the economy was not slowing down that much, was contrary to the message which (chair Jerome) Powell had delivered on Wednesday afternoon,” said Bernard Drury, CEO of Drury Capital, referencing comments made by the head of the Federal Reserve saying it was time to slow the pace of coming interest rate hikes.
“We’re back to inflation-fighting mode,” he added.
The latest economic reports show “some pretty considerable resilience”, said Art Hogan, analyst at B. Riley Financial.
While markets continue to bet on a more modest Fed interest rate increase later this month, traders now see the central bank lifting its rates to a higher “terminal” level when the cycle of increases is complete, he said.
The Dow Jones Industrial Average fell 482.78 points, or 1.4%, to close at 33,947.1, the S&P 500 lost 72.86 points, or 1.79%, to end on 3,998.84, and the Nasdaq Composite dropped 221.56 points, or 1.93%, to finish on 11,239.94.
Monday's losses came after a strong day on Asian equity markets following signs that officials in Beijing and throughout China began easing some pandemic restrictions.
But Hogan said a China comeback would “bring more demand into the commodity complex, which could be inflationary.”
Among individual companies, Tesla sank 6.4% following a Bloomberg report that the company is cutting production at its Shanghai plant.
This weighed on the Nasdaq, where Tesla was one of the biggest fallers, pulling the tech-heavy index to its second straight decline. – AFP, Reuters
