U.S. stocks fell on Tuesday, adding to a rout earlier in the week as investors digest economic warnings from banking heavyweights and ponder the impact of the Federal Reserve’s next policy.
The S&P 500 (^GSPC) fell 1.5% during midday trading, while the Dow Jones Industrial Average (^DJI) fell 1.1%, or more than 370 points. The tech-heavy Nasdaq Composite (^IXIC) fell 1.9%.
Wall Street failed to recover from a rout in Monday’s session, when stocks fell as investors digested early releases in a week full of economic data. The S&P 500 is now poised for its sixth day of decline in the past seven trading sessions, according to Bespoke Investment Group.
On Tuesday, Wall Street’s top bank executives struck a pessimistic tone for next year as inflation hits consumer demand. Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that Bank of America research showed “negative growth” in the first part of 2023, but he added that the contraction would be “light”.
Separately, Goldman Sachs CEO David Solomon told Bloomberg that economic growth is slowing and lower bonuses and even possible job cuts could be expected.
Data readings indicating continued resilience in different pockets of the economy have prompted the market to fixate on the risk that the Federal Reserve will continue to raise interest rates throughout next year.
Fed officials, including Chairman Jerome Powell, have widely suggested the central bank will downgrade to half a point at their meeting next week after four straight 75 basis point increases. But last week’s jobs report showed solid job gains and robust wage growth, the opposite of what the Fed would like to see in its fight against inflation.
A smaller increase would signal a new phase for the central bank’s tightening campaign, but high wage pressures could lead more civil servants to raise their benchmark federal funds above 5% next year, which is currently the case. predicted by Wall Street.
“In light of the various releases, expectations for the Fed’s terminal rate set for May 2023 rose 9.5 basis points on the day to 5.01%, again crossing the 5% threshold,” wrote Jim Reid and his colleagues at Deutsche Bank in a start. morning note Tuesday.
“That’s a notable change from just before Friday’s jobs report, when it hit a low of 4.83%, and means most declines after the speech of the President Powell on Wednesday have now reversed,” he added.
Officials will get another inflation reading on Dec. 13, the first day of the Fed’s two-day policy meeting, when the Labor Department releases the consumer price index for November.
According to Mike Gormley, Equity Institutional Sales at JPMorgan, December got off to a tougher start in the markets as investors “unwind consensus macro positions this year, which have followed since the cool CPI release in mid-November.” .
In commodity markets, oil prices continued to fall on Tuesday, with crude futures trading at $75.83 a barrel. Oil’s recent plunge came even amid recent moves by OPEC and its Russian-led allies to stay the course on production cuts and as Chinese officials tentatively eased COVID restrictions that have eroded the consumption of the world’s largest importer.
In bond markets, the yield on the 10-year US Treasury note rose slightly to 3.57% on Tuesday. The dollar also fell slightly.
In corporate news, PepsiCo (PEP) plans to cut hundreds of jobs at the headquarters of its North American snacks and beverages divisions, The Wall Street Journal reported. The move follows other companies, including Walmart (WMT) and Ford (F), which cut white-collar jobs amid economic uncertainty.
In other movements:
Shares of GitLab (GTLB) rose nearly 12% after the company reported third-quarter earnings that beat Wall Street expectations and boosted expected revenue in 2023.
Fanatics has raised about $700 million from a series of new and existing investors in a round that values the company at $31 billion, The Wall Street Journal reported.
And on the political front, Georgia voters vote Tuesday in another runoff race that will determine whether Democratic Sen. Raphael Warnock can impose a stiff arm on Republican challenger Herschel Walker. Although the Democrats have already taken control of the Senate, both parties have invested heavy resources in the race.
“Senate seats are only elected every 6 years with only a third of the chamber elected each time, a victory for either side would also make it easier for them to take control of the 2024 and 2026 elections, as this seat of Georgia would not be in the election again until 2028,” Reid and his Deutsche Bank colleagues wrote in a note.
Meanwhile, President Joe Biden will visit TSMC’s factory in Arizona on Tuesday as the Taiwanese chipmaker said it would triple its planned investment there to $40 billion. Joining Biden during his visit will be Apple CEO Tim Cook, TSMC founder Morris Chang, chipmaker Micron Technology Inc. chief Sanjay Mehrotra, and NVIDIA founder and CEO Jensen Huang. said the White House.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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