Stocks were on track for a five-day losing streak as renewed pressure on tech-related sectors pulled the Nasdaq Composite and S&P 500 to their lowest levels since 2022.
How stocks are trading
The Dow Jones Industrial Average
was flipping between small gains and losses near 29,199, after rising more than 350 points at its session high.
The S&P 500
fell 30 points, or 0.8%, to 3,581 — on track for its lowest close since November 2020.
The Nasdaq Composite dropped 156 points, or 1.5%, to 10,390, after ending Monday at its lowest since July 2020.
What’s driving markets
Stock indexes gave up a bounce as they headed for fifth straight daily decline, with risk appetite expected to remain limited by concerns the Federal Reserve’s desire to combat rampant inflation with still-higher borrowing costs will hurt economic activity and crimp corporate earnings.
“This is an awful stock market environment that is grappling with a weakening economy, uncertainty over earnings and how long the Fed’s tightening will last, and sentiment issues with an extremely risk averse investor psychology,” said David Bahnsen, chief investment officer at The Bahnsen Group, a wealth management firm based in Newport Beach, Calif. with $3.85 billion in assets under management.
“While we believe a recession is inevitable, it’s impossible to factor this into an actionable stock market view because we don’t know how much recession risk is already priced into markets,” he said, in emailed comments. “There is a significant chance that by the time we are in a recession, markets will already be pricing in the recovery, as markets are forward looking.”
Large-cap tech-related shares, which had driven the stock-market rally off the 2020 pandemic lows, continued to be hit hard, with shares of Facebook parent Meta Platforms Inc.
down more than 4%. Video-streaming giant Netflix Inc.
another pandemic high flier, was down more than 6%. Both Meta and Netflix have dropped more than 60% in the year to date.
The policy-sensitive 2-year Treasury yield
on Tuesday pulled back after rising above 4.3%, near its highest level since 2007. The short-duration benchmark was nearly 400 basis points lower a year ago before the Fed embarked on a rate hiking campaign to tackle consumer price rises running at their fastest pace in 40-years. The 10-year Treasury yield
briefly popped above 4% again in early trading but was at 3.924% in recent trade.
The Bank of England said Tuesday that it would expand its daily U.K. bond purchase operations to include index-linked gilts, the second move this week aimed at trying to calm market volatility.
The International Monetary Fund cut its outlook for economic growth in the United States to 1.6% this year, down from a July forecast of 2.3%. It expects meager 1% U.S. growth in 2023.
CEO Jamie Dimon on Monday warned additional rate rises will be particularly painful, and the S&P 500 could fall by another 20%. The benchmark is already down 24.2% so far in 2022 through Monday. The tech-heavy Nasdaq Composite has shed 32.6% over the same period.
JPMorgan Chase on Friday will help kick off the third-quarter corporate earnings season alongside peers Citigroup
and Morgan Stanley
Analysts expect S&P 500 index aggregate earnings will grow by 4.5% for the period, though much of this is driven by an expected 6.3% gain for energy stocks, according to Refinitiv. Financials’ earnings are forecast to fall 1.6%.
The market must contend with U.S. producer prices data on Wednesday and the consumer prices data on Thursday, reports that should further impact investors’ thinking on the Fed’s policy trajectory.
has been propelled sharply higher by the Fed’s relatively aggressive rate-hiking cycle, and the currency’s strength is seen as yet another headwind for the earnings of U.S. multinationals. The ICE U.S. Dollar Index backed off 0.2% on Tuesday.
Companies in focus
Dow component Walgreens Boots Alliance Inc.
shares were 2.6% higher after the company said Tuesday it has accelerated its plans to buy full ownership of CareCentrix, buying the remaining 45% stake for $392 million.
shares fell 11% after the U.S. Labor Department proposed a new rule that could pave the way for gig workers to be reclassified as employees rather than independent contractors. Lyft Inc.
shares fell 13%.
Shares of Coinbase Global Inc. COIN rose 3.2% after the digital currency brokerage firm said it inked a deal with Google, a unit of Alphabet Inc.
to use Google Cloud as its strategic cloud partner to build advanced exchange and data services.