Shares on Wall Street fell further from their recent highs on Wednesday amid new signs that U.S. economic growth is being held back by a resurgence of coronavirus cases and other challenges.
The S&P 500 slipped 0.1%, its third consecutive decline. The benchmark S&P 500 was roughly split between winners and losers, but weakness in tech, communications and financials weighed on the market. Less risky investments, including consumer staples and utilities, have grown significantly.
Small business stocks fell more than the overall market. Bond yields were mixed. Oil prices have gone up.
Stock indexes were already in the red before 2 p.m. Eastern time when the Federal Reserve released its latest survey of the country’s economic conditions. Dubbed the “Beige Book,” the report found that US economic activity “slowed down” in July and August amid growing concerns about increasing COVID-19 cases, growing problems in the chain of supply and labor shortages.
The Fed said the slowdown was largely due to a decline in restaurants, travel and tourism in most parts of the country, reflecting concerns about the spread of the highly contagious delta variant.
While moderate overall, the market reaction confirmed that investors are somewhat concerned about the economic downturn, said Sam Stovall, chief investment strategist at CFRA.
“You could also say that investors were encouraged by the fact that the Fed didn’t say anything worse,” Stovall said.
The S&P 500 lost 5.96 points to 4,514.07, or 0.5% below the all-time high of the index set last Thursday. The Dow Jones Industrial Average fell 68.93 points, or 0.2%, to 35,031.07, and the Nasdaq composite slipped 87.69 points, or 0.6%, to 2,249.73. The drop in the tech index ended a four-day winning streak.
The Russell 2000 Small Business Index lost 25.88 points, or 1.1%, to 2,249.73.
The market has traded within a narrow range of gains and losses over the past two weeks, as investors seek some sort of understanding of where the US economy is heading with the widespread delta variant of the coronavirus. Investors could find themselves in a choppy market until September as they watch the Federal Reserve and Washington grapple with budget reconciliation, infrastructure spending and the debt ceiling.
“If you look at the schedule, it’s aggressive,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management.
Investors received another contradictory report from the government on Wednesday. US employers posted record jobs for the second consecutive month in July, according to the Labor Department. The disconnect between the growing number of job openings and the weak recovery in employment levels is another signal that the overall employment recovery could hurt the broader economic recovery.
“People have remained reluctant to enter the workforce,” Nixon said. “It’s not a problem of demand, it’s a problem of supply.”
If so, she said, there is little the Federal Reserve can do and it makes sense to scale back its bond buying program. Still, there is probably a long way to go before the central bank focuses on raising interest rates.
The latest beige book will be used by Fed policymakers at their next meeting on September 21-22 to help them decide how to change interest rates and whether to end monthly purchases of $ 120 billion bonds. dollars from the central bank, which it has been making since the pandemic. started to help lower long-term interest rates.
Tech stocks accounted for a significant portion of Wednesday’s sales. Apple fell 1% and chipmaker Advanced Micro Devices lost 2.7%. Among the winners were consumer staples and utilities companies including General Mills, which rose 4.6%, and Consolidated Edison, which gained 2.7%.
Shares of cryptocurrency trading platform Coinbase fell 3.2% after the company revealed it was under investigation by the Securities and Exchange Commission over its intention to offer its Cryptocurrency holders a chance to earn interest on their assets if they loan them out. The company said the regulator threatened to take civil enforcement action and that the launch of the loan program was delayed until at least October.
The yield on the 10-year Treasury bill fell to 1.34% after rising sharply to 1.37% on Tuesday.
Energy prices have generally increased. Oil prices rose 1.4% and natural gas prices jumped 7.6%.
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