Investors who felt the pain of the worst trading day for months might feasibly ask what changed.
The 1.9% retreat in the Dow Jones Industrial Average and 2.6% slide in the Nasdaq Composite can be explained by the realization that equities ran ahead of themselves in the hope that inflation had topped out and the Federal Reserve would soften its stance on interest rate rises.
What has not changed is the insistence from Fed officials that there is more work to be done. Traders are betting this hawkish tone will color Fed Chair Jerome Powell’s Jackson Hole speech on Friday, neutralizing the optimism divined from last week’s Federal Open Market Committee minutes.
The prospect of narrowing the disconnect sent the CBOE Volatility Index, Wall Street’s fear gauge, to its highest level for a month while the 10-year Treasury yield closed above 3% for the first time since June. The 2-year yield is even higher, a sign of looming recession.
Inflation is digging in around the world. As a net exporter of liquified natural gas, the U.S. does not have the same pressure on energy prices that could send U.K. inflation as high as 19% early next year.
But Saudi Arabia comments that oil output could be cut after recent price declines is bad news for U.S. motorists who have seen some respite at the pumps.
Despite Monday’s selloff, the Dow is only back to where it stood on Aug. 8, and the Nasdaq has reversed its climb by an extra week. As the strong dollar threatens to crimp corporate earnings, there is danger of further falls.
Markets can only hope that what Powell says is not as bad as feared. At least now they are listening.
—James Ashton
*** Join Barron’s associate editor for technology Eric J. Savitz today at noon when he speaks with Brook Dane, Tech Fund Manager at Goldman Sachs, about the outlook for tech stocks. Sign up here.
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Twitter Co-Founder Jack Dorsey Roped into Musk Court Battle
Twitter
co-founder Jack Dorsey has been subpoenaed by Elon Musk’s lawyers for evidence on the number of fake accounts on the website, the latest sign that the courtroom battle surrounding the stalled $44 billion takeover of the social media platform will be full of high drama.
- Dorsey is just the latest high-profile name to be drawn in. Others include venture capitalist Marc Andreessen and David Sacks, who helped start PayPal.
- The five-day, non-jury trial is due to take place in Delaware starting Oct. 17. Twitter is trying to force Musk to complete the deal agreed earlier this year, while Musk argues the company didn’t provide enough information about users.
- Dorsey and Musk, both internet billionaires, have been friends for years. Dorsey publicly endorsed Musk’s takeover bid in April, and he was critical of Twitter’s board after he left last year.
What’s Next: Musk’s recent disposal of
Tesla
stock may be a sign that he is raising money in case he’s ordered to go through with the deal, according to Wedbush analyst Dan Ives. If the court decides in Twitter’s favor, the payout may still be lower than the $55.20 a share agreed in April. The stock closed at about $43 on Monday.
—Brian Swint
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Moderna, Pfizer Eye U.S. Approval for Updated Covid Boosters
Pfizer
and
BioNTech
asked the Food and Drug Administration to approve their updated…
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