US close: Stocks fall as fears of recession grow

dl wall street st new york city nyc nyse stock exchange ny dow jones nasdaq sp finance us usa united states of america — Wall StreetSharecast photo / Josh White

Wall Street trading finished weaker on Wednesday, as market participants digested comments made by Federal Reserve chairman Jerome Powell in front of Congress.

At the close, the Dow Jones Industrial Average was down 0.15% at 30,483.13, as the S&P 500 lost 0.13% to 3,759.89 and the Nasdaq Composite was off 0.15% at 11,053.08.

The Dow closed 47.12 points lower on Wednesday, taking a bite out of the gains it recorded on Tuesday when traders returned from the ‘Juneteenth’ break in a slightly more positive mood.

“Fears about inflation will certainly have been soothed to an extent by the 4% drop in oil prices today,” said IG chief market analyst Chris Beauchamp earlier.

“But the fall is a function of continuing fears about a US recession, which is at least one way to cool demand, although it is perhaps not the way central banks and governments would like to solve the problem.”

Stocks had headed south from the opening bell, as investors turned their attention towards Fed chairman Jerome Powell, who kicked off two days of testimony before Congress.

The central bank head updated lawmakers on the state of the US economy, amid inflationary pressures not seen since in roughly half a century.

Powell's comments came a week after the central bank hiked interest rates by three-quarters of a percentage point, its largest rate increase since 1994, in an effort to cool inflation,

Also in focus, analysts at Goldman Sachs warned that a recession was beginning to look more and more likely for the US economy, stating that risks were now "higher and more front-loaded".

"The main reasons are that our baseline growth path is now lower and that we are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply," Goldman Sachs noted.

On the macro front, mortgage applications increased 4.2% in the seven days ended 17 June, according to the Mortgage Bankers' Association of America, a slight deceleration from the previous week's 6.6% rise.

The purchase index rose 7.9%, while the refinancing rate fell 3.1% as the average contract rate on a 30-year fixed-rate mortgage rose by 33 basis points to 5.98% - the highest since November 2008

In equities, recliner maker La-Z-Boy jumped 7.88% after it beat market expectations on its fourth quarter earnings.

On the downside, Tesla reversed earlier gains to close down 0.4%, having risen more than 9% on Tuesday as chief executive Elon Musk said redundancies could see up to 3.5% of the firm’s workforce be let go.

Veteran technology plays Apple and Microsoft were off 0.38% and 0.24%, respectively, snapping a three-day winning streak for both stocks.

Reporting by Josh White at Sharecast.com. Additional reporting by Iain Gilbert.

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