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Colby Smith, Naomi Rovnick and Camilla Hodgson
US stocks dropped on Wednesday, failing to join a rally seen across European equity markets, as technology stocks fell and Federal Reserve officials highlighted the need for more support from Congress to support an economic recovery.
The S&P 500 closed lower by 2.4 per cent after its losses accelerated in late-afternoon trading, more than reversing gains made during Tuesday’s rally. It was the fifth decline in the past six trading sessions for the benchmark index, which is now more than 9 per cent off its most recent record high reached in August.
Meanwhile, the Nasdaq Composite fell more sharply, plummeting 3 per cent as an 10 per cent decline in Tesla shares dragged down the tech-heavy index. The electric vehicle maker’s shares were under pressure after founder Elon Musk pledged to halve the cost of the cars’ batteries, but also warned of “the extreme difficulty of scaling production of new technology”.
Apple and Alphabet also came under selling pressure, each down more than 3 per cent. Taken together, the Nasdaq has lost roughly 12 per cent of its value since peaking in August.
Investors were rattled by growing uncertainty about the outlook for the US economy. And Fed officials alluded to the muddied outlook in a series of public appearances on Wednesday.
Jay Powell, the Fed chairman, argued for Congress to do more to support the recovery, on top of the series of relief packages passed early in the pandemic, as did Charles Evans, Chicago Fed president. Richard Clarida, the Fed vice-chairman, said in an interview with Bloomberg Television that “the economy is recovering robustly, but we are still in a deep hole”.
“When you hear that from the raft of Fed speakers, particularly from the top, it is of concern,” said Quincy Krosby, chief market strategist for Prudential Financial.
Krishna Guha, vice-chairman at Evercore ISI, said the Fed’s “increasingly shrill calls” for more fiscal support were “shaking confidence in the outlook given near-certainty that this additional fiscal support will not be forthcoming before January at the earliest”.
Ms Krosby added that fears about the emergence of a second wave of coronavirus infections, which could prompt localised lockdowns in order to stop the spread, would have devastating consequences both on the recovery and equities more broadly.
“Anything that jeopardises the recovery of the US economy makes the stock market vulnerable,” she said.
Source : https://www.ft.com/content/84d27baf-2b22-3d3e-87bc-fe4958bc14f3