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Stocks slip as Fed report signals ‘downshift’ in economy

The facade of the New York Stock Exchange.
The Standard & Poor’s 500 fell 5.96 points to 4,514.07, which is 0.5% below the all-time high the index set last Thursday.
(Associated Press)

Stocks on Wall Street eased further from their recent highs Wednesday amid more signs that U.S. economic growth is being damped by a resurgence in coronavirus cases and other challenges.

The Standard & Poor’s 500 index slipped 0.1%, its third straight drop. The benchmark index was roughly split between gainers and losers, but weakness in technology, communication and financial stocks weighed down the market. Less-risky investments, including consumer staples and utilities, made broad gains.

Small-company stocks fell more than the broader market. Bond yields were mixed. Oil prices rose.

Retaining staff can be difficult coming out of the pandemic. Money helps, but sometimes that isn’t all an employee wants.

Stock indexes were already in the red before 2 p.m. Eastern time, when the Federal Reserve issued its latest survey of the nation’s business conditions. Dubbed the Beige Book, the report found that U.S. economic activity “downshifted” in July and August amid rising worries over surging COVID-19 cases, mounting supply chain problems and labor shortages.

The Fed said the slowdown was largely attributable to a pullback in dining out, travel and tourism in most parts of the country, reflecting concerns about the spread of the highly contagious Delta variant of the coronavirus.

The S&P 500 fell 5.96 points to 4,514.07, which is 0.5% below the all-time high the index set last Thursday. The Dow Jones industrial average fell 68.93 points, or 0.2%, to 35,031.07, and the Nasdaq composite slid 87.69 points, or 0.6%, to 2,249.73. The tech-heavy index’s decline ended a four-day winning streak.

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The Russell 2000 index of smaller companies lost 25.88 points, or 1.1%, to close at 2,249.73.

The market has been trading within a narrow range of gains and losses for the last couple of weeks, as investors look for any sort of understanding of where the U.S. economy is headed with the widespread Delta variant. Investors could be in for a choppy market through September as they monitor the Federal Reserve and Washington, which has to deal with budget reconciliation, infrastructure spending and the debt ceiling.

“If you look at the calendar, it’s aggressive,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

Investors received another conflicting report from the government Wednesday. U.S. employers posted record job openings for the second consecutive month in July, according to the Labor Department. The disconnect between the growing number of job openings and the weak recovery for employment levels is another signal that the overall jobs recovery could be crimping the broader economic recovery.

“People have remained reluctant to engage in the labor market,” Nixon said. “This is not a demand problem, it’s a supply issue.”

If that’s the case, she said, there’s not much the Federal Reserve can do about it and tapering its bond-buying program makes sense. Still, there’s probably a long way to go before the central bank focuses on raising interest rates.

The latest Beige Book will be used by Fed policymakers at their next meeting Sept. 21-22 to help them decide how to move interest rates and whether to end the central bank’s $120-billion monthly bond purchases, which it has been making since the pandemic started to help lower long-term interest rates.

Technology stocks accounted for a big share of the selling Wednesday. Apple fell 1% and chipmaker Advanced Micro Devices lost 2.7%. Among the gainers were consumer staples and utility companies, including General Mills, which rose 4.6%, and Consolidated Edison, which gained 2.7%.

Shares of cryptocurrency trading platform Coinbase fell 3.2% after the company disclosed it was being investigated by the Securities and Exchange Commission over its plans to offer its cryptocurrency holders a chance to earn interest on their assets if they lent them out. The company said the regulator has threatened to take civil enforcement action, and the launch of the lending program has been delayed until at least October.

The yield on the 10-year Treasury note fell to 1.34% after rising sharply Tuesday to 1.37%.

Energy prices moved broadly higher. Oil prices rose 1.4% and natural gas prices jumped 7.6%.


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