NEW YORK, Aug 26 (Reuters) – The New York Stock Exchange ended sharply lower on Friday after comments by Federal Reserve Chairman Jerome Powell hinted that the U.S. central bank would continue its policy of monetary tightening to control inflation.
The Dow Jones index fell 3.03%, or 1,008.38 points, to 32,283.4 points.
The broader S&P-500 lost 141.38 points, or 3.37%, to 4,057.74 points.
The Nasdaq Composite plunged for its part from 497.56 points (-3.94%) to 12,141.71 points, signing its worst session since June 16.
Over the week, the three New York indices dropped between 4 and 4.5%.
In his speech at the Jackson Hole Central Banking Symposium, Jerome Powell said tight monetary policy will be needed “for a while” before inflation is brought under control, which will not weigh on households, businesses and economic growth.
The Fed chairman gave no indication of what decisions might be made at the central bank meeting in September, but interest rate futures suggested after his speech a probability of 56.5 % of a new rate hike of 75 basis points, against 46.5% before he spoke.
Jerome Powell also put into perspective the announcement at the start of the afternoon of a slowdown in the PCE consumer price index in July, reaffirming that the improvement of a single month is insufficient to convince himself of a decline in inflation.
“Historical data strongly warn against premature policy easing,” he said. “We have to keep going until the job is done.”
For some analysts, the recent rise of the markets which expected a relaxation of the strategy of the Federal Reserve was premature.
“The Fed doesn’t like the fact that the market is already pricing in rate cuts, they want people to believe they’re going to tighten and tighten until the pipe creaks (..) it could be that the market realizes that the Fed is not behind it and won’t be until the data changes,” Markets.com analyst Neil Wilson said.
Technology stocks were particularly affected by the change in mood on Wall Street, starting with Nvidia (-8.9%) and Amazon (-4.6%) which had been the most searched in the previous days.
Meta Platforms, Google’s parent company Alphabet, and Block fared no better, losing between 4.1 and 7.5 percent.
Computing group Dell Technologies was even more chaotic, falling 13.5% following disappointing forecasts.
Alibaba and JD.com, which had opened sharply higher thanks to an agreement between Chinese and American regulators concerning the audit of Chinese companies listed on Wall Street, did not resist the trend reversal either, finally yielding around by 2%.
As for the fashion group Gap, it did not benefit for long from the publication of an unexpected quarterly profit, falling 1.8% after having opened clearly in the green.
“The market reacted negatively because if you look at the expectations of where rates will go this year and next year, the market was anticipating the Fed to ease off next year and nothing that Powell has does not suggest that it will,” said Lindsey Bell, chief market strategist at Ally.
(Report by David French, French version Tangi Salaün)