Stocks dip deeper into bear market ahead of big Fed news
NEW YORK – Most stocks on Wall Street dipped Tuesday in their first trading after tumbling into a bear market on worries that high inflation will push central banks to clamp the brakes too hard on the economy.
The S&P 500 fell 14.15, or 0.4%, to 3,735.48 as investors braced for the Federal Reserve’s announcement on Wednesday about how sharply it will raise interest rates. It wobbled between losses and gains through the day after a couple big companies flexed financial strength with stronger profits and payouts to shareholders.
The Dow Jones Industrial Average fell 151.91 points, or 0.5%, to 30,364.83. The Nasdaq composite rose 19.12, or 0.2%, to 10,828.35 after swinging between a a loss of 0.7% and a gain of 1.1%.
Despite the swings, trading across markets was still calmer than during Monday’s worldwide rout, which sent the S&P 500 down 3.9%. Stocks fell more than 1% in Tokyo and Paris but rose that much in Shanghai. A measure of nervousness among investors on Wall Street eased, even as Treasury yields again pierced their highest levels in more than a decade.
Cryptocurrency prices continued to swing. They’ve been among the hardest-hit in this year’s sell-off for markets as the Federal Reserve and other central banks raise interest rates to rein in inflation and forcefully turn off the “easy mode” that helped prop up markets for years. Bitcoin was down nearly 5% in afternoon trading and sitting at $22,201, according to CoinDesk. It earlier fell to nearly 70% below its record of $68,990.90 set late last year.
Offering some support to the market was a report that showed inflation at the wholesale level was a touch lower in May than expected, though it remains very high.
It was the first trading for U.S. stocks after the S&P 500 closed Monday at 21.8% below its record set early this year. That put it in a bear market, which is what investors call a drop of 20% or more.
At the center of the sell-off is the Federal Reserve’s effort to control inflation by raising interest rates. The Fed is scrambling to get prices under control and its main method is to raise rates, but that is a blunt tool that could slow the economy too much and cause a recession.
The shift toward higher rates has reversed the spectacular rise for markets spurred by massive support from central banks after the pandemic hit in early 2020. The S&P 500 more than doubled from late March 2020 through its peak in January. It was the shortest bull market on record going back to 1929, which followed the shortest bear market on record, according to S&P Dow Jones Indices.
Higher rates typically make investors less willing to pay high prices for risky investments. That’s why some of the biggest stars of the earlier low-rate era have been some of the worst hit in this year’s rout, including bitcoin and high-growth technology stocks. Netflix is down more than 70% in 2022.
Gold for August delivery fell $18.30 to $1,813.50 an ounce. Silver for July delivery fell 31 cents to $20.95 an ounce and July copper fell 5 cents to $4.16 a pound.
The dollar rose to 135.30 Japanese yen from 134.28 yen. The euro fell to $1.0411 from $1.0425.