Stocks tumble as fears of an interest rate hike return

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September 9, 2016

Stocks fell sharply Friday after comments from a Federal Reserve banker suggests that a September rate hike from the nation's central bank might not be totally off the table after all.

September 9, 2016

Stocks fell sharply Friday after comments from a Federal Reserve banker suggests that a September rate hike from the nation's central bank might not be totally off the table after all.

Federal Reserve Bank of Boston president Eric Rosengren in the text of a speech he's making today said there is "a reasonable case can be made" for a rate hike, according to The Wall Street Journal.

Those words rattled Wall Street, as investors had pretty much written off an interest rate increase at the Fed's Sept. 20-21 meeting after the weaker-than-expected August jobs report released last Friday. Although Rosengren did not specifically mention September, his words, to a certain extent, leaves the door open to a rate hike, which Wall Street is not really positioned for.

That got Wall Street's attention and reduced some of the complacency in markets.

The Dow sank more than 300 points. The Standard & Poor's 500 and Nasdaq indexes were down by about 2%.

Also weighing on consumer sentiment was a nuclear missile test by North Korea overnight, the latest provocation by the dictator-controlled Asian nation.

It has been a quiet period for stocks, with volatility very low, a development that is starting to make some investors nervous. Heading into today's session the S&P 500 has gone 52 trading days without a drop of 1% or more, only the 48th time that has happened since 1950, according to Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence.

So what's next? According to history, "after going 50 days without a 1%+ decline, the S&P 500 slipped an average 1.5% in the following 20 trading days and fell in price two out of every three times," Stovall wrote.


Courtesy: USA Today