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US stocks have fallen, with the Nasdaq posting its lowest close since July 2020, as investors worried about the impact of higher interest rates and pulled out of chipmakers after the United States announced restrictions aimed at hobbling China's semiconductor industry.
Federal Reserve vice-chair Lael Brainard said tighter US monetary policy has begun to be felt in an economy that might be slowing faster than expected, but the full brunt of Fed interest rate increases still won't be apparent for months.
Despite growing concerns by a number of economists and analysts that the Fed's interest rate hikes could increase unemployment, Chicago Fed president Charles Evans continued to back the central bank's attempt to lower inflation, saying that while it sounds "optimistic" he believed it could do so "while also avoiding recession."
"People are worried about the economy. People are worried about a possible recession," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
The Philadelphia SE Semiconductor index dropped 3.5 per cent after the Biden administration published a set of export controls on Friday, including a measure to cut China off from certain semiconductor chips made anywhere in the world with US equipment.
Shares of Nvidia Corp fell 3.4 per cent, while Qualcomm Inc, Micron Technology Inc and Advanced Micro Devices also ended lower.
Investors were also cautious ahead of the US third-quarter earnings season, which is set to kick off on Friday with results from some of the major banks.
The Dow Jones Industrial Average on Monday fell 93.91 points, or 0.32 per cent, to 29,202.88, the S&P 500 lost 27.27 points, or 0.75 per cent, to 3,612.39 and the Nasdaq Composite dropped 110.30 points, or 1.04 per cent, to 10,542.10.
Estimates for third-quarter earnings have come down in recent weeks. Analyst now expect year-over-year earnings for S&P 500 companies to have risen 4.1 per cent in the quarter, compared with an increase of 11.1 per cent expected at the beginning of July, according to IBES data from Refinitiv.
Microsoft's stock was down 2.1 per cent and was among the biggest drags on the three major indices. S&P 500 technology led sector declines along with energy.
Investors were also awaiting US inflation data this week.
The US bond market was shut for the Columbus Day holiday on Monday.
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The local market is expected to rise this morning despite a fall on Wall Street overnight. This is your Tuesday morning wrap.
The risk-sensitive Australian dollar made a 2-1/2 year low of $0.6275 on Monday and hovered at $0.6296 early on Tuesday. Analysts at the National Australia Bank said the Aussie was the market's "whipping boy" in a sell off and that further lows were possible in the near term as sentiment is fragile.
Sterling slid versus the dollar on Monday after Friday's strong U.S. labour market data supported bets the Federal Reserve will keep raising rates aggressively. The pound dropped to a 10-day low of $1.1027 in early London trade, but recovered some ground after the Treasury said Britain will publish its medium-term fiscal plan and independent budget forecasts on Oct. 31.
* Strong U.S. jobs and high CPI forecast strengthen hike bets * Bank of England expands support for financial markets * Australian dollar hits 2-1/2 year low By Tom Westbrook and Harry Robertson LONDON/SYDNEY, Oct 10 (Reuters) – The dollar edged higher on Monday as investors set their sights on inflation data later in the week that is expected to show that price pressures remain strong. Meanwhile, sterling slipped for the fourth straight session even after the Bank of England (BoE) expanded its support for financial markets.
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The local market is expected to tumble this morning after Wall Street sank over the weekend. This is your Monday morning wrap.
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