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May 12, 2022, 4:31 p.m. EDT

Dow, S&P 500 finish off day’s lows after Powell is confirmed for second term as Fed chair

By Joy Wiltermuth and William Watts

U.S. stocks closed lower Thursday, but were off the session’s ugliest levels, after Federal Reserve Chairman Jerome Powell was voted in by Congress to serve a second term of four years.

Before Powell’s confirmation, the S&P 500 had been veering close to bear-market territory.

See : The S&P 500 is on the brink of a bear market. Here’s the threshold.

What happened

  • The Dow Jones Industrial Average (DOW:DJIA) fell 103.81 points, or 0.3%, to end at 31,730.30, about 500 points off the session’s low, but extending its losses to a sixth day in a row.

  • The S&P 500 (S&P:SPX) shed 5.10 points, or 0.1%, closing at 3,930.08.

  • The Nasdaq Composite (NASDAQ:COMP) eked out a gain of 6.73 points, or 0.1%, to finish at 11,370.96.

On Wednesday, the Dow Jones Industrial Average fell 327 points, or 1.02%, to 31,834, the S&P 500 declined 66 points, or 1.65%, to 3,935, and the Nasdaq Composite dropped 373 points, or 3.18%, to 11,364.

The S&P 500 has dropped 18.1% from its record high set on Jan. 3. A close at or below 3,837.249 would put the large-cap benchmark into a bear market — defined as a drop of 20% from a recent peak.

What drove markets

Stocks pared losses in choppy trade Thursday after Federal Reserve Chairman Jerome Powell was given more time to dramatically pull back the central bank’s easy-money stance to battle inflation before it wrecks the economy.

Equities initially rallied following fresh economic data that showed slowing wholesale inflation in April, but swung lower in afternoon trade as investors focused on the potential ramifications of still intense price pressures. While meeting forecasts, prices rose 0.5% in April, from a 1.6% jump in March. Price gains over the year slowed to 11% from 11.5%.

At the session’s worst levels, the S&P 500 index traded precariously close to a bear market for the first time since 2020.

“The market is reacting to inflation data that feeds into what the Fed is going to do,” said James Ragan, director of Wealth Management Research at DA Davidson & Co., by phone. “There’s definitely a bearish economic opinion forming that there is a possibility of a looming recession.”

While DA Davidson’s own house view has been a “bit more optimistic,” given the strong labor market, Ragan said a real concern is that households cut back on spending. “Inflation is a scary thing,” he said. “If everybody pulls back a little bit, it could drag down the economy.”

Inflation data released Wednesday may have s hown a peak in price growth , but the figures were hotter than forecast. Core CPI, which excludes energy and food and tends to be a better predictor of future inflation, surprisingly accelerated in April.

“At least it’s peaked, for now,” said Eric Lynch, managing director at Scharf Investments, about the inflation readings. “The question is do we go to 4% relatively quickly or 6%?” he said by phone.

He also said it “matters a lot where we land,” particularly as higher grocery bills, elevated gas prices and soaring rents translate to stretched paychecks. “It’s probably safe to say we’re not getting to 4% too quickly.”

Fed Chair Powell has made fighting hot inflation a key focus in the past six months, including by outlining the central bank’s plans to quickly raise rates and to start shrinking its near $9 trillion balance sheet. He has said it’s possible to tighten financial conditions without derailing the economy.

On the labor front, weekly jobless claims rose 1,000 to 203,000 in the week ended May 7, the Labor Department reported.

Lynch called current market pressures the “other side of the slope,” or a reversal of when Main Street was collapsing early in the pandemic but Wall Street was rising. “I think there’s a lot of concern about earnings and a recession as interest rates rise.”

Related : An inventory crunch is making life impossible for home buyers. Our interactive map can help you track the availability of houses for sale near you.

The cryptocurrency market has been particularly roiled, as the stablecoin Tether (KRAKEN:USDTUSD) said it performed a $1 billion swap after it fell as low as 95 cents on the dollar.

Treasury Secretary Janet Yellen said Thursday that turbulence in the cryptocurrency market is not a hazard for the stability of the U.S. financial system, in testimony at the House Financial Service Committee, while calling on Congress to pass a “comprehensive framework” for digital assets so that there are no gaps in regulation.

Which companies were in focus?

  • Walt Disney (NYS:DIS) shares fell 0.9% after the entertainment giant forecast that streaming subscriber growth may tail off after better-than-forecast additions in its fiscal second quarter.

  • Twitter Inc. (NYS:TWTR) shares fell 2.2% after the company said two executives, general managers for revenue and consumer, are leaving the company ahea d of Tesla Inc. Chief Executive Elon Musk’s takeover of the social-media giant.

  • Beyond Meat Inc. (NAS:BYND) shares lost 4.2% Thursday after the company said it got a revenue got a boost from the launch of Beyond Meat Jerky, through a collaboration with PepsiCo Inc., (NAS:PEP) , but making the product hurt margins for the quarter.

  • GameStop Corp. (NYS:GME) shares gained 10.1% and those of AMC Entertainment Holdings (NYS:AMC) rose 8% as meme stocks enjoyed an upswing .

  • AmerisourceBergen Corp. (NYS:ABC) shares shed 6%, after the drug products and distribution company’s largest investor sold off a chunk of its stake .

  • Coinbase Global Inc. (NAS:COIN) shares advanced 8.9% Thursday, but were down more than 75% on the year, after the company’s CEO recently repeated that bankruptcy is not likely despite the plunge in crypto assets from recent highs.

How did other assets do?

  • Oil futures closed higher, with the U.S. benchmark  CL  up 0.4% to settle at $106.13 a barrel. Gold futures  GC00  fell, with gold for June delivery down 1.6% to settle at $1,824.60 an ounce.

  • Bitcoin BTCUSD fell 2.5%, near $28,500.

  • The Stoxx Europe 600  XX:SXXP  closed down 0.8%, while London’s FTSE 100  UK:UKX  fell 1.6%.

  • The Shanghai Composite  CN:SHCOMP  finished down 0.1%, while the Hang Seng Index  HK:HSI  fell 2.2% and Japan’s Nikkei 225  JP:NIK  lost 1.8%.

Steve Goldstein contributed reporting

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