U.S. stocks fall, Nasdaq sets new 2022 low after struggling to shake off Fed rate-hike gloom

How stocks are trading

• The Dow Jones Industrial Average
  DJIA,
  +0.03%
  fell 191 points, or 0.7%, to 29,106.

• The S&P 500
  SPX,
  -0.32%
  was down 40 points, or 1.1%, at 3,600.

• The Nasdaq Composite
  COMP,
  -1.92%
  gave up 166 points, or 1.6%, to trade at 10,486, trading at its lowest since 2020.

On Friday, the Dow fell 630 points, or 2.1%, the S&P 500 declined 2.8%, and the Nasdaq Composite dropped 3.8%. The Nasdaq Composite was down 31.9% for the year to date through Friday.

What’s driving markets

Major indexes were on track for a fourth consecutive session of losses as concerns about additional interest rate rises by the Federal Reserve continued to damp sentiment.

Trading was expected to be somewhat thinned by the Columbus Day and Indigenous People’s Day holiday, which closed the Treasury market.

Soft data a week ago raised hopes that the Fed would soon pause its monetary tightening cycle in its battle to suppress multidecade high inflation, and the market subsequently rebounded off its near two-year lows. But a strong jobs report on Friday crushed that Fed “pivot” narrative and stocks plunged again.

See: Why stock-market investors keep falling for Fed ‘pivot’ talk — and what it will take to put in a bottom

The 5-day round trip saw an average move for the S&P 500 of 1.9%. Little surprise then that the CBOE Vix index
VIX,
+5.90%,
a gauge of expected S&P 500 volatility, sat on Monday at 33.4, more than 50% above its long term average of 20.

“The market response to Friday’s U.S. jobs report was characteristic of a bear market in equities. U.S. indices reversed sharply in the absence of the bad economic news required to shake the Fed’s hawkish determination,” said Ian Williams, strategist at Peel Hunt.

Now traders will look toward more data later in the week for further guidance on Fed thinking and equity valuations.

“A little more confidence that inflation is really heading lower and that rate hikes might just peak early next year would do wonders for investor sentiment. Just knowing that the fed funds rate will not reach 5% will boost confidence that current market multiples are not unreasonable,” said Christopher Smart, chief global strategist at Barings and head of the Barings Investment Institute, in emailed comments.

“Then investors can get back to the business of picking the companies that will best weather what should still be a mild downturn for U.S. consumer demand next year,” he said.

The U.S. producer price numbers will be released on Wednesday and the consumer prices report on Thursday, the last of their kind before the Fed’s policy decision on Nov. 2.

Then on Friday, third-quarter corporate earnings season really kicks into gear when big banks like JPMorgan
JPM,
-0.36%
and Citigroup
C,
-0.82%
present their numbers.

Read: JPMorgan, Citi, Morgan Stanley and Wells Fargo kick off bank earnings season in choppy waters

Check out: S&P 500 would be in an ‘earnings recession’ if not for this one booming sector — but that may not last long

Investors were also keeping an eye on the strong U.S. dollar, which is considered a drag on the earnings of U.S. multinationals. The dollar index
DXY,
+0.32%
rose 0.4% to 113.23 as the euro broke back below $0.97 after Russia sent missiles into cities across Ukraine.

See: A rampaging U.S. dollar is wreaking havoc in financial markets. Here’s why it’s so hard to stop it.

Companies in focus

• Rivian Automotive Inc.
  RIVN,
  -8.67%
  intends to recall about 13,000 vehicles due to a possible safety issue that has so far been found to have impacted several units, the company said Friday night. Shares were down 9.4%.

• Tesla Inc.
  TSLA,
  +0.99%
  reported record monthly sales of China-made electric vehicles in September, as it continues to ramp production in the world’s number-two economy. The electric-vehicle maker delivered 83,135 EVs from its Shanghai plant in September, an 8% rise from August, according to a report by the China Passenger Car Association. Tesla shares rose 0.3%.