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Stocks fall after Kabul bombing; traders also wait for Fed

  • ASSOCIATED PRESS
                                The facade of the New York Stock Exchange, seen June 16. Technology and communication companies led a broad sell-off on Wall Street today following deadly suicide attacks at the Kabul airport in Afghanistan.

    ASSOCIATED PRESS

    The facade of the New York Stock Exchange, seen June 16. Technology and communication companies led a broad sell-off on Wall Street today following deadly suicide attacks at the Kabul airport in Afghanistan.

Technology and communication companies led a broad sell-off on Wall Street today following deadly suicide attacks at the Kabul airport in Afghanistan.

The S&P 500 fell 0.6% a day after capping a five-day winning streak with an all-time high. The Dow Jones Industrial Average fell 0.5%, while the Nasdaq composite lost 0.6%. Despite the losses, the three major indexes are on track for weekly gains.

Twin suicide bombings struck today outside Kabul’s airport, where large crowds of people trying to flee Afghanistan have massed. At least 60 Afghans and 12 U.S. troops were killed, according to Afghan and U.S. officials. Scores of other people were wounded. The airport had been the focus of NATO evacuations from the country after the Taliban took over last week.

The declines were widespread, with 10 of the 11 sectors in the S&P 500 closing lower. Technology stocks, communication services providers and a mix of companies that rely on consumer spending accounted for much of the pullback. Banks and energy stocks also weighed on the index. Only real estate stocks closed higher.

Stocks had been moving lower in early trading before the bombings, following pullbacks in markets in Asia and Europe, as investors looked ahead to the Federal Reserve’s two-day conference in Jackson Hole, Wyoming, which began today. The selling accelerated swiftly once news of the attacks broke.

“The unfortunate news that we had around the airport bombing perhaps gave people a reason to sell more aggressively,” said J.J. Kinahan, chief strategist with TD Ameritrade.

The S&P 500 fell 26.19 points to 4,470, while the Dow dropped 192.38 points to 35,213.12. The Nasdaq lost 96.05 points to 14,945.81. The tech-heavy index closed above 15,000 points for the first time a day earlier.

Small company stocks shouldered some of the heaviest selling. The Russell 2000 index slid 25.29 points, or 1.1%, to 2,213.98.

Despite the sell-off in stocks, market indicators that traditionally signal worry on Wall Street were little changed. Treasury yields were mixed, and the yield on the closely watched 10-year Treasury held steady at 1.35%. Meanwhile, the price of gold rose only 0.2%.

The VIX, a measure of nervousness among stock investors, rose 12%, but remained slightly below 20, which signals market risk is low.

“That would imply those markets are not expecting a big fallout,” said Sam Stovall, chief investment strategist at CFRA.

Stovall noted that similar shocking geopolitical events in the past have typically not had a lasting impact on stocks.

“In the short term, the question is, ‘will it result in an economic contraction?” Stovall said. “Well, most of the time the answer is no, so it ends up being a short-term, kneejerk reaction by traders that really doesn’t have staying power, because while it’s tragic in the consequences to those involved, it has little to no effect on the global economy.”

Before the attack, most of the market’s attention was on the Fed and on what Fed Chair Jerome Powell will say when he speaks at the central bank’s annual symposium on Friday.

Traders are betting that Fed officials will remain in a “wait and see” mode regarding inflation, since most policymakers believe any inflation earlier this year would be temporary and the rise in COVID-19 cases has worried some economists.

That said, yields have steadily risen in the bond market in the past week, which could be a sign that traders are preparing for the Fed to start winding down its emergency support measures in the coming months.

Jobless claims edged up by just 4,000 to 353,000 from a pandemic low 349,000 a week earlier, the Labor Department reported today. The four-week average fell by 11,500 to 366,500. That’s the lowest since mid-March 2020.

The wave of selling today affected a wide swath of stocks. Microsoft fell 1% and Western Digital slid 4.5%. Dollar Tree led the decline among the S&P 500’s consumer discretionary sector, skidding 12.1%, while clothing retailer Gap dropped 4.1%. Citigroup fell 1% and Facebook gave up 1.1%.

Salesforce.com was one of the biggest gainers, rising 2.7% after the company’s quarterly results easily beat analysts’ expectations. The company also raised its full-year outlook.

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