Stocks retreat, led by Big Tech
Indexes slide again amid a broad sell-off. Drop comes a day after Fed’s rate pledge.
Another slide in technology companies Thursday helped pull stocks lower on Wall Street, extending losses from the day before.
The Standard & Poor’s 500 index lost 0.8% after having been down 1.7% earlier.
The selling was widespread, with eight of the 11 sectors that make up the benchmark index ending the day lower. The sectors that include Amazon, Facebook and Apple took the heaviest losses.
The selling came a day after the Federal Reserve said it will keep interest rates near zero for years to support the wheezing economy. The statement failed to encourage Wall Street and the S&P 500 recorded its first loss in four days Wednesday.
Low interest rates are usually a boon for investors, sending stocks soaring. So why the sell-off?
Analysts gave varying reasons for the market’s weakness. Among them: the gloomy outlook Fed Chairman Jerome H. Powell gave for the economy’s prospects and built-up expectations by some that the Fed would be even more generous with its stimulus.
It isn’t the first hangover stocks have suffered following a rate announcement by the Fed.
“The market really got a bunch of nothing from the Fed,” said Shawn Cruz, senior market strategist at TD Ameritrade. “Maybe that would be OK if we were continuing along with the recovery, but the recovery is starting to decelerate.”
While the market took more losses Thursday, the selling eased toward the end of the day. The S&P 500 fell 28.48 points to 3,357.01. The Dow Jones industrial average lost 130.40 points, or 0.5%, to 27,901.98. It had been down 384 points.
The Nasdaq composite, which is heavily weighted with technology stocks, slid 140.19 points, or 1.3%, to 10,910.28.
The Russell 2000 index of small-company stocks gave up 9.73 points, or 0.6%, to 1,542.60.
The sell-off cut into the market’s gains this week on Monday and Tuesday. The S&P 500 is still up 0.5% for the week, but it’s down 4.1% so far this month after five straight monthly gains.
Another possibility for the downward turn the market has taken the last two days is the diminishing likelihood that Congress will deliver more aid for the economy anytime soon after benefits for unemployed workers and other stimulus expired recently.
Investors say such aid is crucial for the recovery, and Powell talked about the importance of it in a news conference Wednesday.
The Fed’s actions during the economic slump, along with any further actions, could have a diminishing effect and the latest statements may be a “warning shot across the bow of Congress that they need to do something,” Cruz said.
A report Thursday showed that 860,000 workers applied for unemployment benefits last week. But partisan disagreements on Capitol Hill have delayed any renewal of congressional support.
“Fundamentally, the economy is still moving in the right direction, but the risk of potentially jeopardizing the recovery from reduced fiscal support is becoming uncomfortably high,” Piper Sandler strategist Craig Johnson wrote in a report.
Economists say the effect of Congress’ inaction may already be showing in the data. Retail sales growth weakened last month, for example, as unemployed workers were no longer getting $600 in extra weekly benefits from the federal government.
President Trump issued an executive order in early August to provide a scaledback version of the benefits, but that program is expiring.
Trump urged his fellow Republicans on Wednesday to move toward a big package of aid, which is what Democrats have been arguing for, but negotiations remain far apart.
The number of workers applying for jobless benefits has been coming down slowly, but it remains historically high.
Stocks in markets around the world closed lower. In Europe, the German DAX lost 0.4% and the French CAC 40 fell 0.7%. The FTSE 100 in London slid 0.5%.