Roundup: U.S. stocks slide amid rate hike concern, ECB decision

U.S. stocks wavered and tumbled this week, as investors became cautious amid comments by U.S. Federal Reserve officials and a decision from the European Central Bank (ECB).

For the week, the Dow moved down 2.2 percent, while the S&P 500 and the Nasdaq both fell 2.4 percent.

Boston Fed President Eric Rosengren said in a speech Friday that low interest rates are increasing the chance of overheating the U.S. economy, according to the CNBC. Gradually tightening monetary policy is appropriate to maintaining full employment, he added.

However, Fed Governor Daniel Tarullo, also a voting member of the Fed's policymaking committee, said he wanted to see more evidence of inflation before raising rates.

The Federal Open Market Committee, the Fed's monetary policy arm, is set to meet on Sept. 20-21.

"Oddly enough, the probabilities of an interest rate increase this year as interpreted through the Fed Funds futures market have increased somewhat over the last 36 hours or so," said Stephen Guilfoyle, chief market economist at Stuart Frankel & Co., on Friday.

Newly-released data, including nonfarm payrolls report last week, has been in focus recently, with investors pondering over when the central bank will decide to raise interest rates.

The Non-Manufacturing Index, which measures activity in the U.S. service sector, registered 51.4 percent in August, 4.1 percentage points lower than the July reading and missing market consensus of 55.0, the Institute for Supply Management (ISM) said in its monthly survey earlier this week.

"The best that can be said for the August ISM indices is that they have been less reliable guides lately than in the past. If they are to be trusted, the economy is sliding into the worst soft patch of the expansion to date," said Chris Low, chief economist at FTN Financial, in a note.

In the week ending Sept. 3, the advance figure for seasonally adjusted initial claims was 259,000, a decrease of 4,000 from the previous week's unrevised level of 263,000, the Labor Department announced Thursday.

The 4-week moving average was 261,250, a decrease of 1,750 from the previous week's unrevised average of 263,000.

Meanwhile, investors were still sifting through the country's August jobs report released last week. U.S. total nonfarm payroll employment increased by 151,000 in August, well below market consensus of 175,000, and the unemployment rate remained at 4.9 percent.

Wall Street expected the weaker-than-expected payrolls report might push back the central bank's decision to raise interest rates in September.

The current expectations for a September rate hike stand at 18 percent, according to CME's FedWatch tool.

According to the Fed's Beige Book released Wednesday, reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest pace on balance during the reporting period of July through late August.

"Labor market conditions remained tight in most Districts, with moderate payroll growth noted in general. Price increases remained slight overall," said the Beige Book.

The CBOE Volatility Index, often referred to as Wall Street's fear gauge, soared 39.98 percent to end at 17.50 on Friday.

Overseas, the ECB decided to take no further action on its monetary policy for the euro area on Thursday, leaving the key interest rates unchanged and extending the monthly asset purchase of 80 billion euros (90 billion U.S. dollars) until the end of March next year.

ECB President Mario Draghi said at a press conference that the question of the extension of the Asset Purchase Programme -- also known as Quantitative Easing (QE) -- had not been discussed at the governing council meeting.

"For the time being, the changes are not so substantial to warrant a decision to act," he said.

In corporate news, Apple Inc. announced on Wednesday the upgrade of its flagship product, the smartphone known as iPhone, with new features such as water resistance, double-lens camera, stereo speakers and wireless headphone. Enditem