The stock markets in the United States declined due to investors’ concern regarding a potential interest rate hike later this year.
The Down Jones Industrial Average (DJIA) dropped 1.02% to 17,529.98 points; the NASDAQ fell 1.25% to 4,715.83 points; the S&P 500 slid 0.94% to 2,047.21 points; and the Russell 2000 tanked 1.66% to 1,097.68 points today.
Two interest rate hikes possible this year
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta and John Williams, president of the Federal Reserve Bank of San Francisco indicated the possibility of two interest rate hikes this year. The two fed policymakers explained that the increases are warranted given the continued economic growth and improvement in inflation.
During an event in Washington, Lockhart said, “Currently my assumption is two, possibly three. Gradual means two to three rate increases this year. The markets are certainly more pessimistic than I am.”
Investors are expecting a small possibility of an interest rate hike during the upcoming meeting of the Federal Open Market Committee (FOMC) on June 14 to 15. The Committee will again evaluate the pace of interest rate increases after raising its benchmark to range of 0.25% to 0.5% in December.
Williams said, “My view is June is a live meeting” and “six weeks later we meet again. The incoming data have been actually quite good and reassuring. We are in a position to continue to engage in normalization of monetary policy.
Economic data showed that the consumer price index (CPI) climbed 0.4% in April driven by higher prices for gasoline, rents and medical care. The Core CPI increased 0.2%.
Patrick Maldari, a senior fixed income investment specialist at Aberdeen Asset Management commented, “The equity market is taking cues from stronger data and some of the comments from Fed members in terms of maybe hiking more than is priced into the market.”
On the other hand, Yousef Abbasi, a global market strategist at Jones trading Institutional Services, commented that the fed policy makers seemed spooking the equity markets.
“People were chasing the market after yesterday and when the Fed talk started to hit the tape they took their feet off the gas pedal and that’s created a bit of a vacuum,” said Abbasi to Bloomberg.
Stock market movers
The stock price of Abbvie (NYSE:ABBV) dropped 3.52% to $60.25 per share. The company was negatively impacted by the announcement of Coherus Biosciences (NASDAQ:CHRS) that the U.S. Patent and Trademark Office (USPTO) agreed to review its petition to develop and commercialize a copy of Humira, Abbvie’s top-selling treatment for rheumatoid arthritis. The shares of Coherus surged more than 15% to $18.85 per share.
Home Depot (NYSE:HD) declined 2.5% to $131.96 per share despite reporting better-than-expected earnings for the first quarter and raising its outlook for the fiscal 2016.
LendingClub (NYSE:LC) fell more than 8% to 43.60 per share. The Department of Justice opened an investigation against the company. Earlier this month, LendingClub disclosed that its internal review found anomalies related to the sale of loans and a failure to disclose a personal interest in an investment fund.