Dow falls as market sell-off returns to Powell’s new inflation pledge

Shares fell on Thursday as Wall Street weighed Federal Reserve Chairman Jerome Powell’s comments on the central bank’s continued fight against inflation.

The Dow Jones Industrial Average lost 110 points, or 0.35%. The S&P 500 fell 0.26% and the Nasdaq Composite fell 0.28%.

Shares fell during a Q&A session by Powell at the Cato Institute where he reiterated that the central bank will do what it takes to fight inflation. He also signaled that a pause in rate hikes or a pivot to lower interest rates is not soon.

“History strongly cautions against premature policy easing,” he said. “I can assure you that my colleagues and I are strongly committed to this project and we will continue until the job is done.”

Earlier in the morning, the European Central Bank raised interest rates by 0.75 percentage points, taking its deposit to 0.75% from zero, in a widely expected move to curb inflation.

The stock market has just rebounded strongly. Major averages posted their best day since Aug. 10 on Wednesday as the Nasdaq snapped a seven-day losing streak.

Still, equities remain broadly in a downtrend as worries about a slowing economy and further rate hikes from the Federal Reserve push some investors away from riskier segments of the market.

“Recession risk is increasing and so we have taken a more defensive stance in our portfolios. However, high inflation means traditional ‘risk’ strategies like cash and government bonds can hold back total return,” Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, said in a note to clients.

“We are fully invested in our portfolios, using selective bets in this overall risk-neutral position to build resilience against volatility and inflation. In our equity leg, this includes a strong overweight to value stocks and payers dividends,” Goodwin added.

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