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Dow falls as market sell-off returns on new Powell inflation-fighting pledge

Stock market will continue to be volatile in the fall, says JPMorgan's Gabriela Santos

Stocks fell Thursday as Wall Street weighed Federal Reserve Chair Jerome Powell’s comments on the central bank continuing to fight inflation.

The Dow Jones Industrial Average shed 110 points, or 0.35%. The S&P 500 fell 0.26%, and the Nasdaq Composite declined 0.28%.

Stocks slid during a Q&A session from Powell at the Cato Institute where he reiterated that the central bank will do what it takes to fight inflation. He also signaled that a pause in rate hikes or a pivot to cutting interest rates is not coming soon.

“History cautions strongly against prematurely loosening policy,” he said. “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”

Earlier in the morning, the European Central Bank hiked interest rates by 0.75 percentage point, raising its deposit to 0.75% from zero, in a largely expected move to tamp down inflation.

The stock market is coming off a solid rebound. On Wednesday, the major averages posted their best day since Aug. 10, with the Nasdaq snapping a seven-day losing streak.

Still, stocks remain in a downtrend overall as concerns about a slowing economy and further rate hikes from the Federal Reserve are pushing some investors away from riskier parts of the market.

“Recession risk is rising and we have been moving more defensive in our portfolios as a result. However, high inflation means that traditional ‘risk off’ strategies such as cash and government bonds can create a drag on total return,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said in a note to clients.

“We are fully invested in our portfolios, using selective bets within that overall neutral-risk position to build resilience against volatility and inflation. In our equity sleeve, this includes a strong overweight to value equity and dividend payers,” Goodwin added.

Read More:Dow falls as market sell-off returns on new Powell inflation-fighting pledge