Stocks close down after investors suspect Fed may hike interest rates more than expected

The Standard & Poor’s 500 index slid to its first loss in four days after the new chief of the Federal Reserve told Congress he’s feeling more optimistic about the economy.

Fed Chairman Jerome H. Powell’s highly anticipated testimony before the House Financial Services Committee included encouraging words about the economic data that have arrived in recent weeks.

But some investors speculated that could mean the central bank will get more aggressive in raising interest rates, which can hurt stock prices by making bonds more attractive.

“My personal outlook for the economy has strengthened since December,” Powell said in response to a question about whether the recently passed tax cut and other moves by Congress have changed his outlook for how quickly the Fed will raise interest rates.

The S&P 500 fell 35.32 points, or 1.3%, to 2,744.28, after bouncing between modest gains and losses early in the morning.

The Dow Jones industrial average lost 299.24, or 1.2%, to 25,410.03, and the Nasdaq composite fell 91.11, or 1.2%, to 7,330.35.

The immediate reaction in the bond market was to depress the price of existing bonds and send Treasury yields higher. The yield on the 10-year note climbed to 2.90% from 2.86% late Monday.

When bonds are paying more in interest, they also can lure income investors away from dividend-paying stocks.

Real-estate investment trusts in the S&P 500, which are among the biggest dividend payers, lost 2.1% for the biggest loss among the 11 sectors that make up the index. Utilities fell 1.7%.

Comcast had one of the biggest losses in the S&P 500 after it launched a bid for European pay TV broadcaster Sky. The buyout offer is for 22.1 billion pounds ($29.5 billion), and Comcast’s Class A shares lost $2.92, or 7.4%, to $36.66.

Shares of Walt Disney Co. also fell because the Comcast bid could disrupt its takeover offer for 21st Century Fox. The Burbank company lost $4.94, or 4.5%, to $104.87.

On the winning end was Macy’s, which jumped to one of the biggest gains in the S&P 500 after reporting sales and profits that were comfortably ahead of expectations. The retail giant also gave a forecast for 2018 earnings that was higher than analysts expected. Macy’s rose 95 cents, or 3.5%, to $28.40.

In Europe, stock indexes were mixed with France’s CAC 40 close to flat and Germany’s DAX down 0.3%. The FTSE 100 in London was down 0.1%.

In Asia, Japan’s Nikkei 225 jumped 1.1%, South Korea’s Kospi dipped 0.1% and the Hang Seng in Hong Kong lost 0.7%.

In the commodities markets, benchmark U.S. crude fell 90 cents to settle at $63.01 per barrel. Brent crude, the international standard, dropped 87 cents to $66.63 per barrel.

Natural gas was nearly flat at $2.68 per 1,000 cubic feet, heating oil fell 2 cents to $1.96 per gallon and wholesale gasoline lost 2 cents to $1.80 per gallon.

Gold dropped $14.20 to $1,318.60 per ounce, silver lost 19 cents to $16.43 per ounce and copper fell 4 cents to $3.19 per pound.

The dollar rose to 107.42 Japanese yen from 106.91 yen late Monday. The euro dipped to $1.2236 from $1.2312, and the British pound fell to $1.3916 from $1.3968.

UPDATES:

2:50 p.m.: This article was updated throughout with closing stock prices and analysis.

9:10 a.m.: This article was updated throughout with the latest stock market data.

This article was originally published at 7 a.m.