U.S. stocks were trading mixed Tuesday afternoon, a day after the S&P 500 index met the criteria for a bear market ahead of what’s expected to be one of the biggest Federal Reserve interest-rate hikes in decades.
How are stock indexes trading?
- The Dow Jones Industrial Average DJIA, -0.34% fell 9 points, or less than 0.1%, to 30,507
- The S&P 500 SPX, -0.10% gained 9 points, or 0.3%, to trade around 3,759.
- The Nasdaq Composite COMP, +0.60% rose almost 102 points, or 0.9%, to around 10,911.
Over the last four days, the S&P 500 has dropped 9.9%, in what’s the worst percentage decline over that time span since March 23, 2020, when the U.S. was first confronting the coronavirus pandemic. The index entered a bear market Monday, closing almost 22% below its 2022 closing high.
What’s driving markets?
The U.S. stock-market is choppy Tuesday as the Federal Reserve kicks offs its two-day policy meeting, with question marks around how the central bank will respond to the fastest inflation in four decades.
Investors’ expectations for the Fed to hike its benchmark interest rate by 75 basis points have climbed, a move that seemed remote even last week. How the central bank will convey its intentions about future rate activity is also a big question.
“The market is priced for 75 basis points, so I think the Fed might go ahead and take it,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Co. in a phone interview Tuesday, referring to rate hike expectations priced into fed funds futures. The central bank may help reinforce its “inflation-fighting credibility” by raising its benchmark interest rate by three-quarters of a percentage point, he said.
“In my view a surprise 75 bps (basis points) hike would be a happy one,” said Nancy Tengler, chief executive and chief investment officer of Laffer Tengler Investments in emailed comments Tuesday. “The question now is whether the economy can avoid recession.”
The NFIB Small Business Optimism Index decreased marginally to 93.1 in May from 93.2 in April, the lowest level since April 2020, according to data released Tuesday by the National Federation of Independent Business. The reading was broadly in line with economists’ expectations in a poll by The Wall Street Journal.
Meanwhile, the producer-price index showed the cost of wholesale goods and services jumped 0.8% in May, adding to mounting evidence that the highest U.S. inflation in 40 years may persist through the summer. The monthly rise was in line with forecasts from economists polled by The Wall Street Journal.
Mark Haefele, chief investment officer for UBS global wealth management, said risks of a Fed-induced recession have increased, and the chances of a recession in the next six months have risen.
“Wednesday’s FOMC meeting, which includes the Fed’s latest economic forecasts, is one of the most significant in recent history and will be critical for the outlook for financial markets. Volatility is likely to remain high over the coming days, as investors consider the potential need to recalibrate their assumptions based on the Fed’s decisions,” he said.
Which companies are in focus?
- Shares of database giant Oracle Corp. ORCL, +9.45% rose around 9 % after beating earnings and revenue estimates for its fiscal fourth quarter, though its first-quarter earnings guidance was below Wall Street estimates.
- Crypto exchange Coinbase Global Inc. COIN, +0.82% announced it would lay off 18% of its employees less than two weeks after the company said it would extend a hiring freeze and rescind some offers. Shares were down 0.7%.
- FedEx Corp. FDX, +14.34% said it would lift its quarterly cash dividend by 53% to $1.15 a share from 75 cents previously. Shares jumped more than 13%.
How are other assets faring?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 3.461% climbed 8 basis points to 3.45%, after rising Monday to its highest in 11 years. Yields and debt prices move opposite each other.
- The ICE U.S. Dollar Index DXY, +0.18%, a measure of the currency against a basket of six major rivals, was up 0.3%.
- Bitcoin BTCUSD, -2.75% slipped 0.2% to $22,424. The digital asset has dropped nearly 30% so far in June.
- In European equities, the Stoxx Europe 600 SXXP, -1.26% closed 1.3% lower, while London’s FTSE 100 UKX, -0.25% slipped .03%.
- In Asia, the Shanghai Composite SHCOMP, +1.02% closed 1% higher, while the Hang Seng Index HSI, +0.00% ended virtually unchanged in Hong Kong and Japan’s Nikkei 225 NIK, -1.32% finished 1.3% lower.
––Steve Goldstein contributed to this report.