U.S. Stocks Fall Ahead of Powell Testimony as BlackRock Sounds Alarm on Global Economy
The Dow and broader U.S. stock market pulled back sharply on Monday, as investors shifted their focus to Federal Reserve Chairman Jerome Powell’s congressional testimony later this week.
Dow, S&P 500, Nasdaq Retreat
All of Wall Street’s major indexes traded lower at the start of the week and extended their slide to two days. The Dow Jones Industrial Average fell 115.98 points, or 0.4%, to 26,806.14. It was down 189 points earlier in the day.
The broad S&P 500 Index of large-cap stocks closed down 0.5% at 2,975.94. Six of 11 primary sectors reported losses, led by materials. Information technology, health care and communication services also declined sharply.
Meanwhile, the technology-focused Nasdaq Composite Index fell 0.8% to 8,098.38.
The CBOE Volatility Index, Wall Street’s preferred measure of investor anxiety, rose sharply on Monday en route to its highest settlement in over a week. The so-called “fear index” settled above 13.80 on a scale of 1-100 where 20-25 represents the historic average.
Powell to Testify
Fed Chair Jerome Powell heads to Capitol Hill this week where he will testify before the House Financial Services Committee and Senate Banking Committee. According to CNBC‘s Jim Cramer, Powell needs to stress the central bank’s independence following the latest strings of attacks by President Trump.
….As well as we are doing from the day after the great Election, when the Market shot right up, it could have been even better – massive additional wealth would have been created, & used very well. Our most difficult problem is not our competitors, it is the Federal Reserve!
— Donald J. Trump (@realDonaldTrump) July 6, 2019
Last week, President Trump complained once again that the Fed “raised rates too soon… while others did just the opposite.”
Although traders are betting that the Federal Reserve will lower interest rates later this month, a much stronger than expected nonfarm payrolls report on Friday has complicated the outlook. U.S. employers added 224,000 workers to payrolls in June as workforce participation increased. As a result of higher workforce participation, the unemployment rate edged up slightly to 3.7% from 3.6% in May.
BlackRock Warns of Economic Slowdown
Blackrock Inc., the world’s third-largest asset manager, has downgraded its outlook on the global economy for the second half of 2019. China and Europe are the primary catalysts for the downward revision.
“Our view on China has become less positive, and as a result, the rebound we were expecting in Europe is not in the cards anymore,” said Jean Boivin of the BlackRock Investment Institute. It’s a downgrade in the broader global picture, and it’s driven by the European and China view.”
The ongoing trade war between the United States and China, which impacts everything from national security to technology-industry dominance, is also a major factor in the downgrade.
Of course, BlackRock isn’t the only institution to lower its outlook on global economic health. The International Monetary Fund (IMF), World Bank and Organization for Economic Cooperation and Development have all issued similar downgrades this year.
Featured image courtesy of Shutterstock. Chart via Stockcharts.com.