Dow Drops as Rate Fears Fuel September Selloff

Investing.com – The Dow Jones Industrial Average closed at its lowest point since March, experiencing a decline fueled by disappointing consumer confidence data. This increase in uncertainty about the economy comes as consumers grapple with persistently high interest rates and inflation, which may hinder spending habits.

The Dow dropped by 1.1%, equivalent to a loss of 406 points, while the S&P 500 and Nasdaq Composite both fell 1.5%, with the latter dipping below the 4,300 mark for the first time since June.

Are We Seeing Signs of Weakness in Consumer Spending?

Consumer confidence fell more than anticipated, landing at 103.0, a level not seen in four months. This decline raises concerns that consumers are feeling the impact of rising inflation and interest rates.

Consumer spending, which accounts for a significant portion of economic growth, has been surprising analysts by remaining strong for several months. However, ongoing price increases and fears of a government shutdown have begun to shake consumer confidence.

"Responses indicate that consumers are increasingly focused on rising prices, particularly for grocery and gasoline items," noted Dana Peterson, chief economist at The Conference Board in Washington.

Treasury Yields Remain Elevated Amid Rate Warnings

Treasury yields continue to hover at multi-year highs, with yields approaching 4.55%. This situation follows remarks from JPMorgan’s Jamie Dimon, who suggested that the Federal Reserve could push interest rates up to 7%.

“I’m not sure the world is ready for 7%,” Dimon stated in an interview. He emphasized that stakeholders in business should prepare for such a scenario, warning that it could result in stagflation.

With the current Fed funds rate at 5.4%, an increase of an additional 200 basis points would be "more painful than the previous jump from 3% to 5%," he added.

Technology Sector Faces Pressure from Higher Rates

The technology sector resumed its downward trend after a brief relief period, as investors recalibrate their expectations in light of potential prolonged high interest rates.

Shares of Alphabet fell by 2%, leading declines in big tech, followed by Microsoft and Apple. Higher rates diminish the perceived future value of profits, a particularly hard hit for high-growth sectors like technology.

Amazon Shares Drop Following Antitrust Lawsuit

Amazon experienced a decline of more than 4% after the Federal Trade Commission (FTC), along with 17 state attorneys general, filed an antitrust lawsuit against the company. The suit accuses Amazon of employing anticompetitive practices to unfairly maintain a monopoly.

Amazon’s senior vice president of global public policy, David Zapolsky, has countered the allegations, stating that "the lawsuit filed by the FTC is unfounded in both fact and law, and we look forward to defending ourselves in court."

Lawmakers Urgently Working to Prevent Government Shutdown

In Washington, lawmakers are intensifying efforts to prevent a government shutdown ahead of the October 1 deadline, which would halt non-essential government operations.

The Senate is scheduled to vote on a bill to extend government funding for 45 days, with intentions to pass it to the House for a vote led by Speaker Kevin McCarthy. However, the bill’s passage is uncertain, as some conservative lawmakers oppose a short-term funding extension.