Stocks fell on Tuesday as the markets struggled to rebound from Monday’s steep sell-off and rates surged ahead of a key monetary policy announcement from the Federal Reserve.
The S&P 500 tumbled 0.2%, falling further into bear market territory and more than 21% off its high. The Nasdaq Composite rose 0.3% while the Dow Jones Industrial Average dropped 110 points, or 0.4%.
“This is one of the days where the market is going to have to take a wait-and-see attitude and certainly that’s what seems to be happening in the major indices,” said Art Hogan, chief market strategist at National Securities.
“We’re really stuck in middle ground here,” he added, noting that back and forth swings are not unusual ahead of a major announcement.
Stocks extended their losses during the final hour of trading after several failed attempts at a rally throughout the session.
The moves in equities came as rates surged again in anticipation of more aggressive tightening policies from the Fed. The 10-year rate topped 3.45% on Tuesday and hit a new 11-year high as the 2-year jumped 14 basis points to 3.418%.
“If the rates aren’t done going up then the stock market’s not done going down,” said Jim Paulsen, chief investment strategist at The Leuthold Group.
Shares of Oracle jumped more than 9% after the software company reported an earnings beat boosted by a “major increase in demand” in its infrastructure cloud business. FedEx shares soared 14% after upping its quarterly dividend by more than 50% and announcing it would add three new directors to its board. The stock was on pace for its best day in more than 20 years.
Boeing and McDonald’s rose about 2% and 1%, respectively, paring back some of the Dow’s losses. Utilities slipped 3% and consumer staples fell 2%, dragged down by a more than 3% loss for Procter & Gamble and Clorox. Dow Transports jumped 2% buoyed by gains from FedEx and CH Robinson and was on pace for its best day since March.
Travel stocks slipped again with shares of Norwegian Cruise Line and Royal Caribbean down more than 1%. Delta also dipped 2%.
Tech saw a brief rally during the trading session, led by shares of Tesla and Nvidia. Growth areas like technology have suffered in recent weeks as investors rotate into safe-haven sectors like consumer staples, causing the Nasdaq to fall more than 30% off its highs.
Traders now see a more than 90% chance of a 75-basis-point rate hike at this week’s Fed meeting, which concludes Wednesday, according to the CME Group’s FedWatch tool that measures pricing in the fed funds futures markets.
CNBC’s Steve Liesman reported Monday that the Fed will “likely” consider a 75-basis-point increase, which is greater than the 50-basis-point hike many traders had come to expect. The Wall Street Journal reported the story first.
The Fed “has allowed inflation to get out of control. Equity and credit markets have therefore lost confidence in the Fed,” wrote Pershing Square’s Bill Ackman in a tweet Tuesday afternoon.
“Market confidence can be restored if the Fed takes aggressive action with 75 bps tomorrow and in July” and makes a commitment to aggressive increases until inflation “has been tamed,” added Ackman.
Tuesday’s market swings followed an intense sell-off that saw the S&P 500 slump 3.9% to its lowest level since March 2021 and close in bear market territory for the first time since 2020 on Monday. During that last bear market, the S&P 500 lost 33.9% before recovering, according to data compiled by S&P Dow Jones Indices. The data also showed that bear markets on average last more than 18 months.
Meanwhile, the Dow tumbled 2.8% on Monday, putting it roughly 17% off its record high. The Nasdaq Composite dropped nearly 4.7% and is now more than 33% off its November record.
Investors digested another important inflation reading of May’s producer price index on Tuesday. It showed that wholesale prices rose 10.8% and hovered near a record pace.
Sarah Min contributed reporting.