Dow Jones Starts the Week Down 100 Points on Monday

Stocks fell on Monday with the Dow slumping 184.41 points, or 0.57%, to 32,098.99 as rate hike fears continued. The S&P 500 slid 0.67% to 4,030.61 and the Nasdaq Composite fell 1.02% to 12,017.67.

— Samantha Subin

In a note Monday, Wolfe Research Chief Investment Strategist Chris Senyek gave investors six reasons to exercise caution when deciding whether or not to commit capital to the stock market this fall:

• The Fed will probably have to raise its fed funds rate to about 4.5% in order “to sustainably” get inflation near its 2% long-term target
• Higher real (after inflation) interest rates will keep pushing down the P/E multiple investors are willing to pay for equities
• The impact of the Fed’s Quantitative Tightening program, whereby it cuts its balance sheet by $95 billion a month starting in September, is unknown but concerning
• This Thursday’s Institute for Supply Management survey for August is likely “to show additional signs of economic weakness”
• Early cyclical stocks such as semiconductors, homebuilders, automakers and banks have outperformed the ISM new orders numbers “and are due for a pullback.”
• Consumers are likely to feel less wealthy in coming months as a result of the weaker stock market and slower housing price increases, implying that they’ll rein in spending

— Scott Schnipper, with Michael Bloom

Minneapolis Fed President Neel Kashkari told Bloomberg News that he is “happy” the stock market declined sharply on Friday after Jerome Powell’s Jackson Hole remarks.

Kashkari said investors had not been fully appreciating the Fed’s plan to fight inflation, pointing to the market’s rally after the central bank’s July rate hike.

“I certainly was not excited to see the stock market rallying after our last Federal Open Market Committee meeting, because I know how committed we all are to getting inflation down,” Kashkari said. “And I somehow think the markets were misunderstanding that.”

Kashkari, who is not currently a FOMC voting member, was known as one of the more dovish Fed presidents before the current rate hiking cycle.

— Jesse Pound

Stocks pared back their losses heading into the final hour of trading. The Dow was last down 13 points or, 0.04% after falling more than 300 points earlier in the session. The S&P 500 traded flat and the Nasdaq Composite lost 0.46%.

— Samantha Subin

Consumer discretionary has outperformed the broader S&P 500 this quarter even as the Federal Reserve continues its aggressive rate hiking campaign.

The sector is up nearly 16% since the start of the period — lagging only energy — and on pace for its biggest quarterly gain since the second quarter of 2020.

Against this backdrop, CNBC Pro screened for some of the most loved stocks in the sector positioned to rally in the near-term based on their consensus price target. The search brought up a slew of retail, travel and technology names outperforming since the start of July.

CNBC Pro readers can find the full list of stocks that made the cut here.

— Samantha Subin

The Global X Uranium ETF has been one of the biggest bright spots in the market over the past week, and it has jumped more than 8% on Monday.

The second-quarter earnings season is winding down, and the S&P 500 is on track to post a profit growth rate of 8.8%, according to Refinitiv. Jeff Buchbinder, chief equity strategist at LPL Financial, said it means corporate American is still hanging in there. 

“Given the challenges corporate America has faced, we consider the nearly-complete second quarter earnings season a resounding success,” Buchbinder said. “The numerous challenges last quarter included a slowing economy, intensifying inflation pressures, ongoing global supply chain disruptions, and a surging U.S. dollar.”

— Yun Li

The 2-year Treasury yield, which is more sensitive to changes in monetary policy than its longer-term counterparts, reached levels not seen in about 15 years. The rate last traded at 3.41%.

The benchmark 10-year rate traded 7 basis points higher at 3.1%.

— Fred Imbert

Netflix — Netflix shares added 1.3% on news that the streaming company is considering pricing its ad-supported tier at $7 to $9, according to a Bloomberg report.

Pinduoduo — Share of the China-based e-commerce company added more than 16% after posting strong results for the recent quarter. Pinduoduo attributed the strong performance to recovering consumer sentiment.

Read the full list of stocks making the biggest moves midday here.

— Samantha Subin

“For the near term at least, pain will be the name of the game. While a test of the June 16 low may now be underway, we don’t foresee a lower low for the S&P 500,” said Sam Stovall, chief investment strategist at CFRA Research. He noted, however, that, “Month to date through August 25, U.S. equities held up better than investors might have anticipated, especially following such a strong return in July and the ongoing uncertainties from multiple fronts.”

—Fred Imbert, Tanaya Macheel

BTIG’s Jonathan Krisnky thinks the S&P 500 could retest the 3,900 after Friday’s sharp losses and Monday’s follow-through trading.

“One of the things we look at is the amount of volume that’s traded at each given price level on the S&P, and 4,200 was the level over the last two years where the most amount of volume’s traded — so it’s not surprising we got rejected from there on Friday,” Krinsky told CNBC’s “Halftime Report” on Monday. He said the market is not in a void volume wise “until we get to 3,900.”

“There’s a little bit of mechanical trading happening today … but I think you need [to see] a little bit more weakness down towards that 3,900 level,” he said.

To be sure, Krinsky said he doesn’t expect the market to retest the mid-June lows at this point.

— Fred Imbert

There are still opportunities to find winning names in this environment, according to Barclays.

While many investors are worried about earnings for the second half of the year falling short of expectations, Barclays came up with a list of names that could top earnings forecasts.

The firm took a number of factors into account. For instance, it filtered the list for Barclays EPS estimates for this fiscal year that imply further upside from the current consensus estimate.

To read the full CNBC Pro story, click here.

— Michelle Fox

Growth stocks led Monday’s decline, as worries of even tighter Fed policy dented the appeal for these names.

The iShares Russell 1000 Growth ETF (IWF) dropped 1.1% on the day, while the the IWD — its value counterpart — was a relative outperformer, losing just 0.56%.

To be sure, the IWF is still up 8.6% for the quarter, beating out the IWD’s advance in that time by more than 3 percentage points.

— Fred Imbert

The S&P 500 tech sector was the biggest laggard Monday, as the market struggled with concern of higher Federal Reserve rates.

The sector traded 1.4% lower, with On Semiconductor, AMD and Nvidia all falling more than 2%. Shares of tech giant Apple contributed to the decline, sliding more than 1%.

“For the folks that are in these growth names, we’ve always talked about the volatility that’s going to remain in the short term, and I think that’s still there,” New Street Advisors CEO Delano Saporu told CNBC’s “TechCheck” in an interview. “Now, I think the overreaction on the other side would be to abandon these names. I think that’s the wrong thing to do, especially at this time.”

—Fred Imbert

The Dow fell to its low of the day around 11 a.m. ET, trading 300 points lower. Those losses come after the 30-stock average’s 1,000-point drop Friday.

—Fred Imbert

Oil prices jumped during mid-morning trading on Wall Street as traders mulled the possibility of supply cuts from OPEC and its allies.

West Texas Intermediate crude, the U.S. oil benchmark, added 3.2% to trade at $95.99 per barrel. International benchmark Brent crude advanced 2.7% to $103.69 per barrel.

Still, both contracts remain well below their recent highs. In March, WTI surged above $130 per barrel for the first time since 2008 as Russia’s invasion of Ukraine sent global energy markets spinning.

Looking forward, Goldman Sachs said a tight physical market should support prices.

“With oil the commodity of last resort in an era of severe energy shortages, we believe the pullback in the entire oil complex provides an attractive entry point for long-only investments,” the firm said Monday in a note to clients.

— Pippa Stevens

The S&P 500 energy sector added to its sharp month-to-date gain Monday, popping more than 2% on the day. Occidental Petroleum was the best-performing stock in the sector, rising 4.5%, while Marathon Oil and Diamondback Energy also advanced more than 4% each.

Monday’s gain put the energy sector up roughly 8% for August.

—Fred Imbert

A big sell-off on Friday usually means there is another tough day ahead for investors, according to Bespoke Investment Group.

On Fridays where the S&P 500 falls at least 3%, the average next day return is 1.5%, Bespoke said in a tweet. Friday is the only day of the week where a drop that large is typically followed by another decline.

However, the selling may not last too long. The second day after a big drop usually sees a rebound, according to Bespoke.

— Jesse Pound

Stocks added to their Friday losses at the start of trading Monday, as investors continued to digest Federal Reserve Chairman Jerome Powell’s remarks in Jackson Hole, Wyoming Friday.

The blue-chip Dow Jones Industrial Average fell 252 points, or about 0.7%. The broad-market S&P 500 lost 0.7% and the tech-heavy Nasdaq Composite slid 0.8%.

— Tanaya Macheel

More volatility is ahead for the markets as central banks worldwide get more aggressive, Mohamed El-Erian told CNBC’s “Squawk Box” on Monday.

The Allianz chief economic advisor said that markets have failed to internalize three things, including that other central banks will continue to get more hawkish in their fight to tame inflation.

CNBC Pro subscribers can read the full story here.

— Samantha Subin

Tech stocks were set to lead early losses Monday, as U.S. Treasury yields rose after Fed Chair Powell signaled further interest rate hikes Friday.

Meta Platforms, Amazon and Apple were each down more than 1% in premarket trading, while Microsoft, Alphabet, Netflix and Twitter slipped nearly 1%. Salesforce lost about 1.6% in early trading.

— Tanaya Macheel

Shares of Pinduoduo jumped more than 12% during premarket trading following the company’s quarterly results. The China-based e-commerce company beat top- and bottom-line estimates during the period, helped by solid consumer sentiment.

“We saw a recovery in consumer sentiment in the second quarter especially during the 618 shopping festival, a reflection of the resilience of overall consumption,” said Lei Chen, Pinduoduo’s chairman and chief executive officer.

— Pippa Stevens

Bitcoin dropped below $20,000 on Monday as investors dumped risk assets after the Federal Reserve affirmed its commitment to an aggressive tightening path.

The world’s largest digital currency tumbled 5% from Friday’s close to hit a low of $19,526 overnight, a level unseen since July 13, according to Coin Metrics data. Other major digital tokens also sold off, with ether falling to $1,423, its lowest level in a month.

Following Federal Reserve Chairman Jerome Powell’s Friday speech at Jackson Hole, Wharton professor Jeremy Siegel is worried that the central bank may hike interest rates too much and throw the U.S. economy into a recession.

Powell noted that there could be “some pain” ahead as the Fed looks to combat high inflation.

That sentiment was far too negative, according to Siegel, adding that he’s not confident in Powell’s forecasting ability.

“I just found it a very unsatisfactory description,” he told CNBC’s “Squawk Box” Monday.

Siegel also said he’d like to know more about what statistics the Fed is looking at now to gauge inflation and chart its potential path forward, as he’s worried about the lag in many economic data reports.

“If [Powell] waits for the official statistics to really start coming down to 2% he will overtighten and he will make the same mistake on the downside as he made on being too slow on restricting liquidity In 2021 and 2022,” Siegel said.

Siegel’s view is that the Fed probably has another 100 basis points, or one percentage point, left of tightening before it begins to cut rates, probably next year, he said.

—Carmen Reinicke

The pharmaceutical company Catalent saw its shares fall about 8.7% after reporting quarterly results. Despite topping analysts’ profit expectations, revenue for the most recent quarter fell short of expectations, according to FactSet. The company’s full-year revenue forecast also missed expectations.

— Tanaya Macheel

The dollar index on Monday hit 109.478, its highest level dating back to Sept. 16, 2002, when it reached 109.67.

At the same time, the dollar struck a more than two-year high against the Chinese offshore yuan. Meanwhile, the pound stooped to a fresh low of 1.1645 against the dollar and its lowest level since March 25, 2020.

— Samantha Subin, Gina Francolla

Tavis McCourt, Raymond James’ institutional equity strategist, says the market could see more volatility through the end of the year.

“As the summer comes to a close, it’s worth looking back to Memorial Day for perspective, equities have been largely flattish and extremely volatile since late May, credit spreads have been flattish, and bond yields have trended higher and the curve has become increasingly inverted,” he said in a note to investors Sunday.

“We expect more volatility as we enter Fall and Winter, as we suspect earnings expectations will start weakening more severely, offset by inflation headlines/central bank hawkishness weakening as well.”

— Tanaya Macheel

Morgan Stanley’s Michael Wilson said in a note Monday that, while Powell’s remarks Friday may have dented stocks, the market’s biggest risk is still corporate earnings.

“The path for stocks from here will be determined by earnings, where we still see material downside,” the bank’s chief U.S. equity strategist said. “Almost all of the weakness for stocks during 1H22 was due to the Fed and tighter financial conditions. The 2H outcome will ultimately be determined by earnings expectations for next year, in our view.”

“As a result, equity investors should be laser focused on this risk, not the Fed, particularly as we enter the seasonally weakest time of the year for earnings revisions, and inflation further eats into margins and demand,” he said.

—Fred Imbert

RBC’s Lori Calvasina said investors should brace for more market volatility in the near term.

“In terms of stock market direction, we think it’s more likely than not that US equities saw their lows in mid June, but have expected conditions to turn choppy again in the months ahead with
risk that the S&P 500 will retest its YTD low again in late 3Q,” the bank’s head of U.S. strategy said in a note.

—Fred Imbert

The probability of a 75-basis-point hike at September’s FOMC meeting rose to 70.5% as of early Monday morning U.S. time, according to the CME Group’s FedWatch measure.

Traders’ expectations have been split between a half-point and three-quarter point increase. The probability for the 0.75 point move stood at 54.5% on Friday morning in the U.S. shortly after Fed Chairman Jerome Powell’s speech in Jackson Hole.

The chance for a 50-basis-point hike now stands at 29.5%, FedWatch showed.

—Jihye Lee

European markets were lower on Monday morning, tracking overnight losses in Asia as market participants digested comments from Federal Reserve Chair Jerome Powell.

All European sectors and major bourses slipped into negative territory shortly after the opening bell. Tech stocks led the losses, down nearly 1.7%.

Germany’s DAX index fell over 1.1%, France’s CAC 40 index dipped around 1.1%, while Italy’s FTSE MIB fell around 1%.

U.K. markets are closed on Monday for a bank holiday.

— Sam Meredith

The negative reaction in the stock market following Fed Chairman Jerome Powell’s speech shows that higher rates haven’t been reflected in equity prices, according to Rob Carnell, head of research at ING.

On Friday, Powell reiterated that the central bank will continue raising rates to subdue inflationary pressures, warning there may be “some pain” ahead as these measures take hold.

“Powell’s saying you need a recession to get this under control, to get inflation down, and I think that’s really where the equity market has to start thinking what’s the right price for the U.S. in a recession with high rates thrown in,” Carnell said on CNBC’s Capital Connection.

“Realistically, that means some sort of recession,” he said. “The only big question is how bad, how long is it going to be?”

—Jihye Lee

The world is at an “inflection point” — and that means there will be “profound changes” to the way we invest, Goldman Sachs Asset Management said in a recent report.

The firm pointed to rising interest rates as a result of persistent inflation, disrupted supply chains, “elevated sensitivity” to climate issues, geopolitical instability and deglobalization.

“In this new environment, the portfolio construction playbook that worked so well in recent decades may be less effective going forward, forcing a rethink in approach,” they added.

Here’s how investors can respond, according to Goldman.

— Weizhen Tan

Investors on Friday appeared to be spooked by Fed Chair Jerome Powell’s firm statements about the central bank’s commitment to rate hikes. While Powell has said that he has hoped to achieve a “soft landing,” he made clear on Friday that the Fed is prepared to hike interest rates even if it causes economic pain.

“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said in prepared remarks. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

— Jesse Pound

The negative momentum from Friday appears to have lasted over the weekend, as U.S. stock futures opened lower on Sunday evening.

Dow futures fell more than 200 points, while Nasdaq 100 futures fell about 1%.

— Jesse Pound

Friday was a washout day on Wall Street, with the Dow suffering its worst day since May. All 11 sectors finished down at least 1%, with tech falling more than 4%.

Here’s how the three major averages faired:

• The Dow dropped 1,008 points, or 3.03%, for its worst day since May 18. The Dow finished the week down 4.22%.

• The S&P 500 fell 3.37%, its worst day since June 13, to finish the week down 4.04%.

• The Nasdaq Composite fell 3.94%, its worst day since June 16, to finish the week down 4.44%.

— Jesse Pound, Christopher Hayes