S&P 500, Dow slip after Powell’s somber outlook on economy

(Reuters) – The S&P 500 and Dow slipped on Wednesday as Federal Reserve Chairman Jerome Powell warned of an extended period of weak growth and stagnant incomes, while he also dismissed speculation over negative interest rates.

FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon

“There is a sense, growing sense I think, that the recovery may come more slowly than we would like,” Powell said in a webcast, as he pledged to use more of the central bank’s power, as needed, to support the economy from the pandemic’s hit.

Powell made it clear, however, the Fed won’t push interest rates below zero, as traders had been increasingly betting.

“There you have the chairman of the Federal Reserve that has already thrown trillions of dollars at this issue only accentuating his continued concern, that the disaster we’ve all been fearing is going to happen unless we wake up from this coma,” said Kenny Polcari, chief market strategist at Slatestone Wealth LLC in Jupiter, Florida.

Unprecedented monetary and fiscal stimulus actions as well as hopes of an economic recovery have been vital in helping the three main U.S. stock indexes climb about 30% from their March lows.

However, the rally paused this week as a spike in cases in Germany, South Korea and China and a warning from a top U.S. health expert spurred worries of a second wave of coronavirus infections as lockdowns are slowly lifted in several countries.

“Volatility is likely to persist because there’s a lot of uncertainty on how this virus plays out,” said Brian Levitt, Global Market Strategist for Invesco.

At 10:12 a.m. ET, the Dow Jones Industrial Average was down 161.70 points, or 0.68%, at 23,603.08, the S&P 500 was down 9.76 points, or 0.34%, at 2,860.36. The Nasdaq Composite was up 33.91 points, or 0.38%, at 9,036.46.

Energy, financials and industrials posted some of the steepest percentage losses among the 11 major S&P sectors. Strength in Amazon.com Inc, Apple Inc and Nvidia Corp propped up the tech-heavy Nasdaq.

Declining issues outnumbered advancers for a 2.93-to-1 ratio on the NYSE and a 1.66-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and seven new lows, while the Nasdaq recorded 19 new highs and 39 new lows.

Reporting by Medha Singh and Ambar Warrick in Bengaluru; Additional reporting by Sinead Carew in New York; Editing by Shounak Dasgupta

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