4;12pm: S&P slips further into a bear market
The Dow closed Tuesday down 152 points, 0.5%, at 30,365, the Nasdaq Composite added 19 points, 0.2%, to 10,828, while the S&P 500 lost 14 points, 0.4%, to 3,735.
It was the fifth consecutive losing day for the S&P, pushing the benchmark further into bear market territory.
The benchmarks all spent time on both sides of the flatline as investors looked ahead to Wednesday's interest rate decision from the Federal Reserve.
“This is one of the days where the market is going to have to take a wait-and-see attitude and certainly that’s what seems to be happening in the major indices,” said Art Hogan, chief market strategist at National Securities, as reported by CNBC,
12:15pm: Traders wait to see what the Fed will do
At midday, the Dow was down 223 points, 0.7%, to 30,294, Nasdaq Composite was up 29 points, 0.3%, to 10,838, and the S&P 500 was 10 points lower, 0.3%, at 3,739.
After an initially promising start, the benchmarks have been volatile and slipped into the red. All eyes are on the Federal Reserve decision looming tomorrow, and additional interest rate hikes are anticipated.
“An anemic and now rapidly disappearing bounce in US markets shows us that investors are very cautious about going bargain hunting ahead of tomorrow’s momentous Fed decision," IG Chief Market Analyst Chris Beauchamp wrote Tuesday. "Not just 75bps but even 100bps are being viewed as a possibility on Wednesday evening, as the committee looks to try and steal a march on inflation. At the moment it is quite tough to gauge the kind of decision that will keep markets from selling off yet further, and whether hints at more dramatic tightening will counter any optimism if the Fed sticks to 50 bps. But hopes of a summer pause are certainly entirely dashed now.”
Meanwhile, Oracle Corporation (NYSE:ORCL) shares are up 8% to $69.20 after the software company posted an earnings beat that it attributed to a surge in demand for its infrastructure cloud business. FedEx Corporation is another bright spot, as its shares have jumped 14% to $226.41 after it announced plans to add three new directors to its board.
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9.35am: Wall Street edges higher
US stocks opened slightly higher on Tuesday but analysts say this is unlikely to last as investors eye the Fed’s upcoming interest rate hike.
Just after the open, the Dow had gained 70 points at 30,586 points.
The S&P 500 was up 20 points at 3,770 points and the Nasdaq was up 94 points at 10,904 points.
OANDA senior market analyst Craig Erlam said the mood had turned very negative since the latter half of last week, with Friday’s inflation data delivering the knockout blow to investors.
“Expectations have turned more hawkish again with numerous calls for 75 basis point hikes overnight, which markets are now heavily pricing in,” he said. “We're now at a stage whereby if the Fed doesn't deliver 75, the backlash could be quite severe.”
He added that, against such a backdrop, it was hard to imagine sentiment drastically improving any time soon.
“Part of the pause in the US may simply be a factor of the S&P hitting bear market territory and the proximity to the Fed interest rate decision tomorrow,” Erlam said. “I don't think we'll be seeing much FOMO dip-buying all of a sudden.”
6.30am: All eyes on rate hikes
US markets were expected to edge higher on Tuesday with a slight rebound from the hefty falls seen on Monday with the wider S&P index having ended in 'bear market' territory.
Futures for the Dow Jones Industrial Average rose 0.2% in pre-market trading, while those for the broader S&P 500 added 0.3%, and contracts for the Nasdaq-100 were up 0.5%.
However, the very same concerns about spiraling inflation and slowing growth that sent share prices sharply lower for the past few sessions are here to stay and trading is expected to remain choppy. Investors are also looking to Wednesday’s US Federal Reserve's latest policy meeting verdict for direction.
“US and European stock futures are bouncing off ... yesterday's low after tanking due to the ongoing concerns that a sharp rate hike by the Fed could result in further economic weakness,” said Naeem Aslam, chief market analyst at avatrade.com
“The S&P has declined over 9% during the past three days as traders and investors continue to sell riskier assets. Basically, what we are seeing is a flight to safety, but at the same time, it is immensely difficult for traders to find safety in this environment as pretty much everything is falling, including gold and Bitcoin,” he added.
Recent falls have taken the S&P 500 index into bear market territory - down 20% from the start of the year - signaling that more falls are likely. One key trigger was the US inflation data last Friday which showed that price pressures are at 41-year highs.
Given the focus on inflation, US producer price data, which will give a snapshot of upstream price pressures, are due out later today and could deal equities another blow. Consensus forecasts point to a 0.8% rise in May after rising by 0.5% in April. The data is due at 8.30 am ET.
In energy markets, WTI crude oil futures rose 0.6% to $121.62 a barrel and Brent crude futures gained 0.7% to $123.10.
Contact the author at jon.hopkins@proactiveinvestors.com