Shares fell on Tuesday as the market struggled to recover from Monday’s precipitous declines that pushed the S&P 500 back into bear market territory and traders braced for a major Federal Reserve monetary policy announcement.
The Dow Jones Industrial Average fell 150 points, or 0.5%, after rising a staggering 170 points earlier in the session. The S&P 500 fell 0.2% and the Nasdaq Composite rose 0.3%.
“This is one of those days when the market will have to take a wait-and-see attitude, and that’s certainly what seems to be happening in the major indices,” said Art Hogan, chief market strategist at National Securities.
“We’re really stuck in the middle here,” he added, noting that back-and-forth swings aren’t uncommon ahead of a major announcement.
Shares of Oracle rose more than 8% after the software company reported a profit margin spurred by a “big surge in demand” in its infrastructure cloud business, while FedEx shares rose 13% after announcing it was appointing three new directors. board of directors would add. The stock was heading for its best day in more than 20 years.
Chevron and McDonald’s were up about 2% and 1% respectively, curbing some of the Dow’s losses. The energy sector was up 2%, boosted by shares of Occidental Petroleum and Phillips 66, each up more than 5%. Dow Transports also rose 2% on gains from FedEx and CH Robinson, heading for its best day since March.
Travel stocks fell again, with Carnival and Norwegian Cruise Line’s shares falling more than 1%. Airline shares Delta and United also fell about 1%. Meanwhile, Coinbase shares lost 4% after the company said it would cut 18% of its workforce.
The moves followed Monday’s intense sell-off, with the S&P 500 falling 3.9% to its lowest level since March 2021 and closing into bear market territory for the first time since 2020. During that latest bear market, the S&P 500 lost 33.9% before recovering. , according to data collected by S&P Dow Jones Indices. The data also showed that bear markets last more than 18 months on average.
Meanwhile, the Dow fell 2.8% on Monday, removing it about 17% from its record high. The Nasdaq Composite fell nearly 4.7% and is now more than 33% lower than the November record.
Those losses came as expectations grew that the Fed would raise rates more than initially expected. CNBC’s Steve Liesman reported Monday that the Fed will “probably” consider a 75 basis point increase, ahead of the 50 basis point increase many traders had expected. The Wall Street Journal first reported the story.
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 prices in fed fund futures markets.
That change in Fed policy expectations pushed yields higher, with 10-year yields briefly trading above 3.4% on Monday. The benchmark rate fell back to around 3.32% on Tuesday.
“The move in 10-year Treasury yields towards 3.5% shows that market fears that the Fed will go further behind the curve are mounting,” wrote UBS strategists led by Mark Haefele. This, in turn, will give the Fed less room to ‘declare victory’ and avert rate hikes. As a result, we believe the risks of a Fed-induced recession have increased and the likelihood of a recession in the next six months.”
Investors processed another key inflation measurement of the May producer price index on Tuesday. It showed that wholesale prices were up 10.8% and are hovering near a record pace.