U.S. stocks fell on Tuesday, adding to a rout earlier in the week as investors digested economic warnings from banking heavyweights and pondered the impact of upcoming Federal Reserve policy.
The S&P 500 (^GSPC) fell 1.4%, while the Dow Jones Industrial Average (^DJI) fell 1%, or more than 350 points. The tech-heavy Nasdaq Composite (^IXIC) fell 2%.
Wall Street was unable to recover from the setback in Monday’s session as stocks sank as investors reviewed the first releases of a week full of economic data. Overall, the S&P 500 had its sixth day of decline in the past seven trading sessions, according to Bespoke Investment Group.
On Tuesday, top Wall Street bank executives struck a bearish 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’s research showed “negative growth” in the first part of 2023, but he added that the contraction would be “soft.”
Separately, Goldman Sachs CEO David Solomon told Bloomberg that he sees economic growth slowing and smaller bonuses and even possible job cuts on the horizon.
Economic data readings pointed to continued stability in various pockets of the economy, but led to intense market stabilization around the risk that the Federal Reserve will continue to raise interest rates over the next year.
Fed officials, including Chairman Jerome Powell, have largely suggested the central bank will make a half-point move at next week’s meeting after four straight 75-basis-point hikes. But last week’s employment report showed strong job gains and solid wage growth, the opposite of what the Fed would like to see to fight inflation.
A smaller increase would signal a new phase for the central bank’s tightening campaign, but rising wage pressures could lead more officials to raise federal funds next year above the 5% rate currently expected by Wall Street.
“Amid mixed releases, Fed rate expectations for May 2023 rose 9.5 basis points intraday to 5.01%, re-crossing the 5% threshold,” Jim Reid and colleagues at Deutsche Bank wrote early. morning note tuesday.
“That’s a marked change from where it was just before Friday’s jobs report, when it hit a low of 4.83%, and suggests that most of the bearish moves following Chairman Powell’s speech on Wednesday have now been reversed,” he said.
Officials will get another read on inflation 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 stronger start for the markets as investors “vacated their consensus macro positions this year after the tepid CPI print in mid-November.”
The price of oil in the commodity markets continued to fall on Tuesday, and a barrel of WTI crude oil was 74.43 dollars. Oil’s latest decline comes even as OPEC and its allies, led by Russia, have made recent moves to stay on track with output cuts, and as Chinese officials tentatively eased COVID curbs that have reduced consumption in the world’s biggest importer.
In bond markets, the yield on the 10-year US Treasury note fell again on Tuesday to 3.52%. The dollar rose.
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 reports. The move follows other companies including Walmart ( WMT ) and Ford ( F ) cutting white-collar jobs amid economic uncertainty.
In other actions:
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Shares of GitLab ( GTLB ) rose 9.5% after the company posted third-quarter earnings that beat Wall Street expectations and boosted forecast revenue for 2023.
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Fanatics raised nearly $700 million from a range of new and existing investors in a round that valued the company at $31 billion, the Wall Street Journal reported.
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Apple ( AAPL ) plans to scale back ambitious self-driving plans for its future electric car and has pushed back the car’s target launch date, Bloomberg reports.
On the political front, Georgia voters cast ballots Tuesday in a runoff that will determine if Democratic Sen. Raphael Warnock can face off against Republican challenger Herschel Walker. Although the Democrats have already taken control of the Senate, both parties have poured huge resources into the race.
“Senate seats are only up for election every 6 years, only one-third of the chamber is elected each time, a win for either party would make it easier for them to take control in the 2024 and 2026 elections as Georgia will not have that seat. Be ready for re-election by 2028,” Reid and colleagues at Deutsche Bank wrote in the note.
Meanwhile, President Joe Biden visited TSMC’s ( TSM ) Arizona plant on Tuesday as the Taiwanese chipmaker said it would triple its planned investment there to $40 billion. The White House said that Biden was visited by Apple CEO Tim Cook, TSMC founder Morris Chang, chip manufacturer Micron Technology Inc. ( MU ) CEO Sanjay Mehrotra, NVIDIA ( NVDA ) Founder and CEO Jensen Huang and others attended. .
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Dani Romero is a reporter for Yahoo Finance. Follow him on Twitter @daniromerotv
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