Wall Street’s main indexes fell 1% on Tuesday as investors positioned themselves for new economic projections and another big interest rate hike by the US Federal Reserve this week to cushion decades of high inflation.
All 11 major S&P sectors declined in early trade, down 1.6% and 2.1%, respectively, in the real estate and materials sectors.
Shares of rate-sensitive growth companies such as Meta Platforms Inc., Tesla Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc. and Amazon.com Inc. fell between 0.9% and 1.5% as Treasury yields climbed in anticipation of a rate hike.
The benchmark US 10-year Treasury yield reached 3.58%, its highest level since April 2011, while the closely watched yield curve between the two-year and 10-year notes reversed further.
An inversion in this part of the yield curve is seen as a reliable indicator that a recession will follow in one to two years.
The US central bank is widely expected to hike rates for a third-straight 75 basis points on Wednesday, with markets also pricing in a 19% chance of 100 bps growth and the terminal rate at 4.49% by March 2023.
“Traders are extremely cautious ahead of the Fed’s announcement yesterday and it is the yield dysregulation that is making the market volatile,” said Peter Cardillo, chief market economist at Spartan Capital Securities LLC.
The S&P 500 is trading below the 3,900 mark, a level that was regarded by technical analysts as a strong support for the index.
Attention will also be given to updated economic projections and endpoint sentiment for policymakers’ rates and dot plot projections for signals on unemployment, inflation and economic growth outlook.
“Tomorrow’s key is going to be indications of the next possible move by the Fed chief. The question is whether 75 basis points would be ideal for the next few meetings and that’s what the market is basically worried about,” Cardillo said.
“I don’t expect a full percentage point (tomorrow’s rate hike) and I don’t think the market is pointing to that.”
The benchmark S&P 500 index is down 19.2% so far this year as investors fear aggressive policy tightening could propel the US economy into recession, a recent dire outlook from delivery firm FedEx Corp and the upside US Treasury. The crisis is escalating from the yield curve.
At 9:52 a.m., the Dow Jones Industrial Average was down 396.47 points, or 1.28%, at 30,623.21, the S&P 500 was down 49.09 points, or 1.26%, at 3,850.80, and the Nasdaq Composite was down 118.50 points, or 1.03. %, at 11,416.52.
The automaker said Ford Motor Co fell 8.8%, said supplier costs related to inflation would be about $1 billion higher than expected in the current quarter and sees 40,000 to 45,000 vehicles in inventory due to parts shortages, sales delays. .
PayPal Holdings Inc slipped 4.1% after Susquehanna Financial Group downgraded the fintech company’s stock from “buy” to “neutral”.
The number of issues declined to a 9.11-to-1 ratio on the NYSE and 3.66-to-1 on the Nasdaq.
The S&P index recorded a new 52-week high and 29 new lows, while the Nasdaq recorded 11 new highs and 188 new lows.
This story has been published without modification in text from a wire agency feed.
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