Stocks ended broadly lower on Tuesday as Wall Street grew increasingly concerned about an economic slowdown and looked to the Federal Reserve to raise interest rates to suppress the highest inflation in decades.
The S&P 500 fell 1.1%, with more than 90% of stocks and every sector in the benchmark index down. The Dow Jones Industrial Average and Nasdaq Composite also fell 1%.
The sell-off comes as traders wait to see how high the Federal Reserve will raise interest rates at its meeting that ends on Wednesday.
The central bank is widely expected to announce a sharp three-quarter rate hike, the third in a row. Investors will also be closely watching Fed Chairman Jerome H. Powell for any clues about how aggressively the Fed will move from here to curb inflation.
“The market is definitely preparing for the worst, and you’re going to see some selling pressure coming,” said Paul Kim, chief executive of the Simplify ETF.
The S&P 500 lost 43.96 points to 3,855.93, while the Dow lost 313.45 points to 30,706.23. The Nasdaq lost 109.97 points to end at 11,425.05.
Retailers, tech stocks, healthcare companies and banks are the biggest weights in the market. Best Buy fell 4.1%, Microsoft fell 0.8%, Abbott Laboratories fell 1.7% and JPMorgan fell 2%.
U.S. crude fell 1.5 percent, weighing on energy stocks. Exxon Mobil fell 0.8%.
Smaller company stocks fell more than the broader market. The Russell 2000 fell 25.34 points, or 1.4%, to 1,787.50.
Bond yields were mostly marginally higher. The yield on the 10-year Treasury note, which affects mortgage rates, rose to 3.56% from 3.52% late Monday and was at its highest level since 2011.
Two-year U.S. Treasury yields tended to follow expectations of Fed action, holding steady at 3.95%, hovering near their highest level since 2007.
Stocks have been falling and Treasury yields have risen as the Federal Reserve raises borrowing costs in an effort to slow the hottest inflation in four years. Aggressive rate hikes by the central bank have been rattling markets, especially as Fed officials insist they are determined to keep raising rates until they are sure inflation is under control.
Powell’s blunt warning In a speech last month, the rate hike would “bring some pain.”
“He’s done everything he can to show that this is going to be another aggressive move,” said Liz Young, director of investment strategy at SoFi. “He’s very clear about what they’ve been focusing on.”
If the Fed raises its key short-term interest rate by three-quarters of a point on Wednesday, it would lift the benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level in 14 years from zero at the start of the year. .
Such a rate hike could give stocks a small boost, King said, reflecting traders’ relief that the central bank did not opt for a 1 percent hike.
Beyond that, investors will be watching what Powell has to say at the Fed’s latest rate policy statement and afternoon press conference for clues on whether the Fed is still primarily focused on reducing inflation, or if there are hints the Fed is considering more impact on the economy.
“As long as the Fed keeps playing the chicken game and insists that inflation is its sole mandate, the market will continue to fall,” King said.
Wall Street worries that higher interest rates could slow economic growth and push the economy into a recession. Data showing the U.S. economy has slowed and companies warning about the impact of inflation and supply chain problems on their operations have added to those concerns.
ford The S&P 500 fell 12.3% after lowering its third-quarter earnings forecast, as a parts shortage will leave as many as 45,000 vehicles unfinished for the quarter ending Sept. 30. last week, FedEx GE warned investors that inflation was hurting their business.
The US isn’t the only country suffering from high inflation or efforts to deal with high prices.
Riksbank It raised its key interest rate by a full percentage point to 1.75% on Tuesday, catching almost everyone by surprise as it struggles to reduce inflation, which measured 9% in August.
Consumer inflation in Japan jumped to 3 percent in August, the highest level since November 1991, but well below readings of more than 8 percent in the United States and Europe. The Bank of Japan will hold a two-day monetary policy meeting later this week, although analysts expect the central bank to stick to its loose monetary policy.
Next up are interest rate decisions from Norway, Switzerland and the Bank of England.
European markets mostly fell, while Asian markets rose.