S&P 500 drops for fifth straight day as market selloff continues

U.S. stocks fell on Tuesday as investors feared higher interest rates and stubborn inflation could tip the economy into recession and hurt corporate profits.

The S&P 500 fell more than 1% to its lowest level since November 2020 at the start of the session, but regained some losses to trade down 0.1%, penalized by weaker technology stocks such as Meta Platforms, whose high valuations are sensitive to rising rates. The Nasdaq fell 0.35%, also rebounding from levels that earlier in the day hit a fresh 52-week low, weighed down by tech and semiconductor stocks.

The Dow Jones Industrial Average rose 188 points or 0.65%, supported by jumps in Amgen and Alliance of Walgreens boots.

Bond prices also fell and the 10-year US Treasury yield approached the key 4% level overnight. Yields slowed their rally on Tuesday morning, with the 10-year rate rising about 2 basis points to 3.904%. Bond yields are inverse to prices, and a basis point is one-hundredth of one percent.

The moves came as investors anticipate key inflation data that will indicate how aggressively the Federal Reserve will raise interest rates to keep inflation under control. On Wednesday, the producer price report will be released, followed by the consumer price index for September on Thursday. On Friday, September’s retail sales will give a better insight into consumption.

The trajectory of central bank interest rate hikes could push the US economy into recession, leading to lower corporate profits.

JPMorgan CEO Jamie Dimon warned on Monday that the United States is likely to fall into a recession over the “next six to nine months”, and said the S&P 500 could fall another 20% depending on whether the Federal Reserve stages a soft or hard landing for the economy.

“This is a dreadful stock market environment that is grappling with a declining economy, uncertainty over earnings and the duration of Fed tightening, and sentiment issues with an extremely risk-averse investor psychology. “said David Bahnsen, Chief Investment Officer of The Bahnsen. Group, in a Tuesday note.

“We think the Fed will raise interest rates one or two more times until the fed funds rate hits 4%, then pause, at which time the Fed will assess the damage done,” he said. -he adds.

This week also kicks off earnings season. On Friday, JPMorgan, Wells Fargo, Morgan Stanley and Citi – four of the world’s largest banks – released their quarterly results.

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