FX.co ★ Stocks decline amid Fed hints on future rate hikes

US stocks fell sharply on Wednesday after Fed Vice Chairman Richard Clarida said rates may rise by 2023. But mixed economic data for July showed that US companies are creating significantly fewer jobs than expected.

In an interview yesterday, Clarida said the central bank is preparing to start raising interest rates in 2023, with a possible announcement of cuts later this year. The comments followed hints that the US Treasury might reduce bond purchases this fall, despite the weak ADP employment report, which was at odds with a record rise in the ISM services index.

Weaker-than-expected earnings reports from General Motors and CVS also pushed the S&P 500 down, so the index closed 0.42% lower on Wednesday. Meanwhile, the Nasdaq 100 rallied, thanks to a surge in tech stocks.

"Having lost 19.6 million jobs in March and April last year, we have since added 13.1 million. I really don't like to use the word "stagflation", but unfortunately, we now have a form of it that will further complicate the work of the Federal Reserve System," Bleakley CIO Peter Boockvar said.

Recent stock rally to all-time highs offset the concerns over the rapid spread of the Delta variant. Expectations of continued stimulus and solid profits boosted the move, but risks remain.