By DAMIAN J. TROISE and ALEX VEIGA – AP Business Writers
Shares closed lower on Wall Street on Tuesday after another volatile trading day. Technology companies like Microsoft were again the biggest draw in the market. The S&P 500 gave up 1.2%, but received much of the decline at noon after being down as much as 2.8%. The index has been steadily declining throughout the month and has now fallen 9.2% from the record high it set on the first trading day of the year. Nasdaq fell 2.3 percent. Markets have been nervous about rising inflation, worrying that the Federal Reserve’s actions to combat it will be either too late or too aggressive.
THIS IS A NEWS UPDATE. The AP’s past history follows below.
Shares fell on Wall Street on Tuesday, continuing a volatile round of trading that has caused markets to fluctuate between steep losses and gains as investors assess several threats.
Higher inflation has put pressure on businesses and consumers, and the Federal Reserve is expected to fight it in 2022 by raising interest rates. Investors fear the Fed may either come too late or be too aggressive. The central bank will issue its latest policy statement on Wednesday.
The virus pandemic is still hovering over the economy, threatening to push progress with each new wave. The International Monetary Fund mentioned the omicron variant as the reason why it has downgraded its forecast for global economic growth this year.
And a potential conflict between Russia and Ukraine threatens to push energy prices even higher, while forcing more countries to focus on fighting a war instead of inflation and COVID-19.
Equity indices fell sharply to start the day, but were out of their lows in the late afternoon, a sign that some investors are betting that a weaker outlook for economic growth may prompt the Fed to take a more targeted approach to raising interest rates.
“Weaker economic growth projections have helped investors breathe a sigh of relief that the Fed does not have to be overly aggressive,” said Sam Stovall, CFRA chief investment officer.
The S&P 500 fell 1% from 1 p.m. 15.33 east. The benchmark index, which was down 2.8% in the beginning, has been steadily declining since it hit record highs on the first trading day of the year, January 3rd. It is now getting closer to going into a “correction”, which i.a. markets watchers means a 10% drop from a peak.
The Dow Jones Industrial Average fell 81 points, or 0.2%, to 34,288. The blue-chip index had fallen 818 points in morning trading. The technology-heavy Nasdaq fell 1.7 percent. The index had originally fallen 3.2 per cent. The Nasdaq made a correction last week and has now fallen more than 15% from its highest level on November 19th.
Small corporate stocks also lost ground, pulling the Russell 2000 index 0.4% lower.
Major indices had a similar start to trading on Monday and were down most of the day before a late buying spree pushed them to a higher closing. That recovery can only have been a “head fake,” said Barry Bannister, chief stock strategist at Stifel. More declines are likely to await the market, he said.
The market downturn reflects Wall Street’s concern about signs of slowing economic growth due to COVID-19 and a Fed that can not really go back on what it said it would do, Bannister said.
“The market has come to terms with it, and that’s a big thing,” he said. “Fiscal and monetary tightening together are tough on financial assets when they come out of a booming party from stimulus.”
Although the S&P 500 managed to make a profit after its slide ride on Monday, a measure of nervousness on Wall Street known as the VIX index remained high. This suggests that stress continues to grow in the system, with markets in a “high-speed spin cycle,” UBS strategists wrote in a report.
Futures contracts related to VIX meanwhile indicate that investors are preparing for a high level of volatility in the short term, but less in the following months. It’s a flip from their typical behavior last year.
Technology stocks again led the losses as investors worry about rising interest rates. Higher interest rates tend to make stocks in high-flying tech companies and other expensive growth stocks less attractive. Microsoft fell 2 percent.
Retailers and communications companies also fell. Home Depot fell 1.5% and Netflix fell 5%. US crude oil prices rose 2.7%, helping to boost energy stocks. Occidental Petroleum rose 8.2 pct.
American Express rose 9.2% for the largest gain in the S&P 500 after the credit card company reported that its fourth-quarter earnings rose 20% from a year earlier.
Bond yields rose. The yield on the 10-year government bond rose to 1.78% from 1.74% late Monday.
The price of gold, which is often considered a hedge against inflation, rose 0.6 per cent.
Associated Press Business Writer Stan Choe contributed.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Discussion about this post