Stock Market News For Feb 28, 2018

After three consecutive days of gains, benchmarks finished in the red on Tuesday after Fed Chair Jerome Powell’s comments renewed concerns over increase in the pace of rate hikes. Powell in his speech to Congress indicated that the U.S. economy is strengthening and signaled that the key rate might be increased at a gradual pace. However, investors fretted that the central bank’s move to stop the economy from overheating might lead to not just three but even four more rate increases this year.

How the Benchmarks Fared?

The Dow Jones Industrial Average (DJI) decreased 1.2%, or 300.96 points, to close at 25,410.03. The S&P 500 fell 1.3% to close at 2,744.28. The tech-laden Nasdaq Composite Index closed at 7,330.35, losing 1.2%. The fear-gauge CBOE Volatility Index (VIX) increased 17.7% to close at 18.59. A total of 7.4 billion shares were traded on Tuesday, considerably lower than the last 20-session average of 8.3 billion shares. Decliners outnumbered advancers on the NYSE by a 3.38-to-1 ratio. On Nasdaq, a 3.07-to-1 ratio favored declining issues.

Markets Stumbles as Rate Hike Fears Loom

In his first appearance on Capitol Hill, Fed Chairman Jerome Powell presented an encouraging picture of the U.S economy. Powell expressed confidence that the coming few years will be “good years for the economy”. After all, Americans are willing to spend more and business houses have ramped up their investments, helping to boost productivity.

Consequently, traders predicted that an upbeat economy will fuel inflation further and prompt the Fed to step in and hike rates at a faster pace. Many of them are already predicting the Fed will increase rates four times instead of three. According to data from the CME Group (NASDAQ:CME), odds of four rate hikes by year-end rose to 33% on Tuesday from about 20% on Monday.

For the time being, Powell maintained that the Fed would keep to its plan of hiking rates three times this year. But, he did mention that “we’ve seen some data that will in my case add some confidence to my view that inflation is moving up to target”.

Following a three-day long rally, all the key U.S. indexes declined as investors remained wary of an increase in the pace of rate hikes. The Dow, S&P 500 and Nasdaq posted their worst daily performance in percentage terms since Feb 8. The Dow registered a slump of more than 300 points. For the S&P 500 index, all the 11 sectors finished in the red, with the real estate and consumer discretionary sectors emerging as the biggest drags on the S&P 500.

The Real Estate Select Sector SPDR (XLRE) fell 2.14%, becoming the biggest loser among the S&P 500 sectors. Some of its key holdings, including Simon Property Group, Inc. (NYSE:SPG) and American Tower Corporation (REIT) (NYSE:AMT) fell 3.2% and 1.4%, respectively.

Additionally, the Consumer Discretionary Select Sector SPDR (XLY) decreased 2.12%, which was the worst performing sector in the S&P 500. Its key components like Amazon.com, Inc. (NASDAQ:AMZN) and The Home Depot, Inc. (NYSE:HD) declined 0.7% and 1.9%, respectively. Both the retailers have a Zacks Rank #3 (Hold). You can see Zacks Investment Research

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Written By: Zacks Investment Research