U.S. stocks closed lower Wednesday as Federal Reserve Chairman Jerome Powell's congressional testimony reinforced the central bank's objective to rein in inflation as he hinted at the likelihood of further interest rate hikes.
All three major U.S. stock indexes notched their third straight daily declines, with megacap tech- and tech-related shares weighing most.
"It seems the market is catching its breath after a huge start to the month," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "Historically June isn’t a very strong month for stocks, but this year could go down as one of the strongest Junes ever; so a small break in the run stocks have had is perfectly normal."
Tesla Inc., along AI-related stocks such as Microsoft Corp. and Nvidia Corp., were the heaviest drags.
In his testimony before the U.S. House Financial Services Committee, Powell reiterated the fact that the central bank remains "strongly committed to bringing inflation back down to our 2% goal," and said it would be "a pretty good guess" that future rate hikes are in the cards if the economy continues on its current path.
"Two hikes, which is what the dot plot told us," Detrick said. "There could be one more rate hike, but I don’t think anyone's buying the fact that there will be two. Markets are assuming that the Fed is very close to being done."
At last glance, financial markets have priced in a 74% likelihood of another 25 basis point interest rate hike at the conclusion of July's monetary policy meeting, according to CME's FedWatch tool.
Powell is scheduled to testify before the Senate Banking Committee on Thursday.
According to preliminary data, the S&P 500 lost 22.98 points, or 0.52%, to end at 4,365.73 points, while the Nasdaq Composite lost 165.09 points, or 1.21%, to 13,502.20. The Dow Jones Industrial Average fell 102.42 points, or 0.30%, to 33,952.64.
Tesla Inc. was the biggest drag on the S&P 500, sliding after Barclays downgraded its rating on the stock to "equal weight" from "overweight," saying the electric automaker's recent rally was too sharp relative to fundamentals.
"A big portion of today’s weakness is because Tesla had one of its worst days in a while," Detrick added. "It's a stock that was due for a breather as well."
"After a record win streak some kind of weakness is perfectly acceptable and normal."
Package delivery firms FedEx and United Parcel Service Inc dropped after FedEx posted disappointing quarterly earnings and said waning global demand is pressuring its profit margins.
Crypto firms, including Coinbase, Riot Platforms, Marathon Digital and Bit Digital, advanced as Bitcon breeched the $30,000 level.
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