Wall Street drops as Fed's Powell takes hawkish stance

Updated: Dow falls 300 points; Comcast bids for the UK's Sky TV to start bidding war with Disney.

Stocks on Wall Street reversed direction and stead declined after Federal Reserve chairman Jerome Powell indicated further rises in short-term interest rates would flow from the strong US economy.

In deal news, Comcast and Disney shares dropped as a bidding war opens for Murdoch-controlled UK broadcaster Sky TV.

US government bonds weakened, with the yield on the benchmark 10-year Treasury note rising to 2.906% from 2.862% on Monday.

At the close of trading in New York, the Dow Jones Industrial Average plunged 299.34 points, or 1.2%, to 245,410.03. The S&P 500 shed 1.3% to 2744.28 and the Nasdaq Composite lost 1.2% to 7330.35.

Stocks rose soon after the opening bell but declined as Mr Powell addressed the Congress for the first time since he took charge of the Fed earlier this month.

His comments, while not a surprise, added to concerns that the economy could be growing so fast that it fuels inflation further, potentially forcing the Fed to step in and hasten its pace of interest-rate increases. The Fed has indicated it plans to raise rates three times this year.

“The newness of Jerome Powell puts the markets in a bit of uncertainty and unpredictably,” said Rich Guerrini, chief executive of PNC Investments. “I don’t know if the markets can really anticipate or figure out where he wants to go as it would relate to the economy.”

While Mr Powell maintained the Fed would keep to its plan of raising interest rates three times this year, his comments to lawmakers carried hawkish undertones.

“The key things that are going to drive the markets for the foreseeable future are interest rates and inflation,” said David Spika, president of Guidestone Capital Management. He says his firm has been reducing risk in its portfolio over the past six months by selling down some of its technology holdings and reinvesting those proceeds into shares of financial firms.

All sectors decline
All 11 major S&P 500 sectors traded lower, with consumer discretionary stocks shedding 1.7% and real-estate companies declining 2%.

Comcast shares fell 6.4% after it announced $US30.9 billion offer for Sky TV, topping a bid from 21st Century Fox that is separately involved selling assets to Dow-listed Walt Disney Co. That includes Fox’s 39% stake in Sky in a deal worth more than $US52 billion. Disney shares fell 4.3% and Fox’s 2.7%.

Comcast, which earlier walked away from deal talks over Fox, is owner of the NBCUniversal TV and movie business as well as a cable TV network.

Meanwhile, company earnings and actions contributed to some of the biggest individual stock moves.

Shares of Macy’s rose 4%, putting it among the S&P 500’s biggest gainers, after the retailer beat analysts’ earnings expectations and gave upbeat guidance for the year.

The Stoxx Europe 600 fell 0.2%.  France’s CAC 40 fell 0.3%, Germany’s DAX also fell 0.3% and the UK’s FTSE 100 eased 0.1%.