Stocks slip amid worries of big rate hike from Fed

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 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 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.

“No one’s going to take meaningful positions today ahead of what could be a rip-roaring day” with the Fed’s announcement, said Katie Nixon, chief investment officer for Northern Trust Wealth Management.

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 turn off the “easy mode” that helped prop up markets for years. Bitcoin was down nearly 5% and sitting at $22,201, according to CoinDesk. It earlier fell to nearly 70% below its record of nearly $68,991 set 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 high. It could be an indication that wholesale inflation peaked in March, according to Jack Ablin, chief investment officer at Cresset Capital Management.

But economists said the data won’t keep the Federal Reserve from raising its key interest rate Wednesday by a larger-thanusual amount. Investors are expecting the biggest increase since 1994, a hike of three-quarters of a percentage point, or triple the usual amount.

A week ago, such a mega-increase was seen as only a remote possibility. But a market-bludgeoning report Friday on inflation at the consumer level has seemingly pinned the Fed into getting more aggressive. It showed inflation for the consumer price index got worse in May.

“It’s really a split decision in terms of the market as to whether that will be a good thing or a bad thing,” Nixon said of a big rate increase. “It certainly opens the door to additional big hikes in the future.”

Treasury yields continued to climb, with the two-year yield touching its highest level since November 2007, before the financial crisis, according to Tradeweb. The 10-year yield during the day reached its highest level since April 2011.

They also had a relatively reliable warning signal of recession in the bond market flashing on and off. In afternoon trading, the yield on the 10-year Treasury had climbed back above the two-year yield, at 3.47% versus 3.41%.