S&P 500, Nasdaq 100 Hit by Hawkish Fedspeak & Apple Selloff

STOCK MARKET OUTLOOK:

• U.S. stocks selloff on Thursday on risk-off mood on Wall Street, with Apple’s shares dropping nearly 5%
• The S&P 500 falls 2.11% while the Nasdaq 100 plummets 2.86%
• Hawkish Fed commentary weighs on market sentiment

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U.S. stocks suffered heavy losses on Thursday on risk-off sentiment, halting in its tracks the nascent recovery seen in the previous session, a sign that traders and other speculators continue to fade strength every chance they get amid a complete lack of confidence in the market’s ability to sustain a rebound.

When it was all said and done, the S&P 500 sank 2.11% to 3,640, registering its worst close since November 2020, with utilities and consumer discretionary leading the sell-off in a widespread rout that saw all sectors finish in negative territory.

Meanwhile, the Nasdaq 100 plummeted 2.86% to 11,165 and came within striking distance from retesting its June lows, dragged down by Apple’s massive plunge. Shares of the Iphone maker slumped nearly 5% after several sell-side analysts lowered their price target for the stock following reports of slowing production in response to a weaker demand profile.

Equities opened in the red after U.S. economic data showed that jobless claims for the week ending September 24 fell by 16,000 to 193,000, the lowest level since April, a sign that the labor market remains extremely resilient.

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If Corporate America doesn’t begin to cut workers more quickly, consumer spending will likely hold up and wage pressures will remain elevated, complicating the Fed’s fight to tame inflation through demand destruction. As a result, policymakers may have to slam on the breaks even harder to trigger a more pronounced slowdown, creating a more hostile environment for risk assets.

Comments from various Fed members, such James Bullard and Loretta Mester, reinforced the bearish bias and selling momentum on Wall Street. For context, both officials retained a very hawkish tone, indicating that the central bank is determined to restore price stability even at the expense of a painful recession.

With the FOMC hell bent on bringing its policy posture to sufficiently restrictive levels, along with its pledge not to pivot prematurely to an easing stance, U.S. stocks will continue to struggle in the near term. The sell-off could even get worse when third-quarter earnings season begins in early October if companies start issuing negative profit guidance, in line with FedEx’s warning a few weeks ago. This means the next meaningful leg lower for both the S&P 500 and Nasdaq 100 could be just around the corner.

S&P 500 DAILY CHART

S&P 500 Chart Prepared Using TradingView

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—Written by Diego Colman, Market Strategist for DailyFX