U.S. stocks fell, putting markets on course for another day of bumpy trading, as investors awaited the Federal Reserve’s policy meeting and parsed a docket of earnings.
The S&P 500 fell 2% Tuesday afternoon, while the technology-heavy Nasdaq Composite slumped 2.9%. The blue-chip Dow Jones Industrial Average dropped 1.2%.
The losses were broad-based, with 10 out of 11 of the S&P 500’s sectors falling. Energy stocks were the only gainers.
The moves follow a jarring intraday reversal Monday, when major indexes clawed back losses to post a big comeback. The Dow reversed losses of more than 1000 points for the first time in history. After falling more than 4% in intraday trading, the Nasdaq recorded its biggest reversal since 2008.
Concerns about the Fed have driven investors out of stocks and stoked worries that the popular trade of buying small dips in the market was growing weaker, potentially removing one source of support for the stock market. Monday’s comeback showed that many investors were quick to pounce on beaten-down stocks, though much of that enthusiasm appeared to fade by early Tuesday.
“My fear is we are going to go lower,” said
a portfolio manager at Penn Mutual Asset Management. It is “going to be a big week.”
Behind the selloff are fears about the Fed raising interest rates this year and withdrawing the stimulus that propelled markets in recent years. Some investors said they no longer expect the so-called Fed put—or the Fed’s tendency to cut rates or hold off on rate increases in response to market turmoil—to stay in place. Others have been more optimistic.
“We expect the earnings season to reassure, and in a worst-case scenario could see a return of the ‘Fed put,’” wrote
strategists in a note to clients on Monday.
fell over 7% after reporting a fourth-quarter loss of $3.8 billion. Meanwhile,
shares fell around 0.7% after the company reported a better-than-expected performance.
Market volatility has surged in recent sessions, as investors have grown anxious about how rapidly the Fed will act to fight inflation by raising interest rates and shrinking its balance sheet. Meanwhile, earnings have failed to deliver the bumper beats investors became accustomed to last year, while geopolitical tensions surrounding Ukraine and Russia have weighed on sentiment.
This week, investors will be parsing results from tech heavyweights including
They have been among the companies weighing on the S&P 500 the most this year, according to Goldman Sachs.
Individual investors appeared to be buying the dip in stocks such as Tesla, Apple,
and Microsoft on Monday, according to
co-founder of DataTrek Research. That potentially helped the market record its historic comeback.
Around 77% of companies reporting results so far have surpassed analysts’ expectations, according to Refinitiv.
While earnings in 2021 were a source of strength for equity markets, recent results suggest companies are beginning to struggle with inflation and slowing economic growth, said
chief investment officer at CIBC Private Wealth.
“We have gotten so used to this cycle of companies blowing the roof off of earnings expectations, but so far that is not happening,” he said.
Meme stocks continued to suffer Tuesday.
declined each declined over 2% after falling sharply on Monday.
Fed officials are set to debate the path of monetary policy, including the speed at which they could shrink the nearly $9 trillion bond portfolio, at their two-day meeting that starts Tuesday. Chairman
is expected to use his postmeeting comments to lay the groundwork for a cycle of interest-rate increases.
The yield on the benchmark 10-year U.S. Treasury note rose to 1.762% in recent trading, from 1.735% Monday. Bond yields move inversely to prices.
Overseas, Japan’s Nikkei 225 closed down 1.7%. Australia’s S&P/ASX 200 and South Korea’s Kospi Composite both retreated more than 2%. Hong Kong’s Hang Seng Index shed 1.7%.
European stocks rebounded, having closed Monday before U.S. indexes rallied. The pan-continental Stoxx Europe 600 index was up 0.7% Tuesday.
—Quentin Webb and Rebecca Feng contributed to this article.
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