Investors’ hopes of a mild correction are waning this afternoon on yet another dreary day in the market. Why are stocks down today?
Well, despite some early promise stemming from Nvidia’s (NASDAQ:NVDA) show-stopping earnings, stocks quickly took a turn for the worse on one pessimistic monetary forecast. Indeed, earlier today, Boston Federal Reserve President Susan Collins told Yahoo Finance that it is “extremely likely” the Fed will maintain its elevated interest rates — and potentially pass even more rate hikes this cycle.
“We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” Collins said from the annual economic symposium in Jackson Hole, Wyoming.
If you recall, in July the Fed raised rates for the 11th time since March 2022, pushing the federal funds rate to between 5.25% and 5.5%, the highest level in decades. Not for nothing, inflation has cooled from 9% last June to about 3% as of July 2023.
Still, according to Collins, more work is needed to get inflation to the Fed’s 2% goal:
“I think it is going to take some time to really be sure we are seeing sustained realignment of demand and supply that is needed in order to bring inflation back on a path that will get back to 2%.”
Why Are Stocks Down Today?
It appears that hawkish Fed commentary has largely overshadowed Nvidia’s brow-raising earnings today. Indeed, the S&P 500 and Nasdaq Composite closed down by 1.3% and 1.8% on Thursday.
With today’s drop, the stock market’s recent correction has grown some threatening thorns. After climbing nearly 20% in the first six months of the year, the S&P has slipped more than 4% since July 31. Meanwhile, the tech-heavy Nasdaq Composite has given back about 6% in the past few weeks. At the time of this writing, the Nasdaq Composite is still up about 30% year-to-date (YTD).
Despite the recent slump, this year’s winners remain on the up and up. This includes NVDA stock, which closed up slightly in the green today on record earnings and a better-than-expected future outlook.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.