U.S. stocks finished mixed Tuesday after swinging between gains and losses as investors parsed a spate of economic data and comments from Federal Reserve officials.
All three indexes spent much of the morning in the green, then slipped by midday. The Dow Jones Industrial Average, which entered a bear market on Monday, fell 0.4% Tuesday as of 4 p.m. ET. The broad S&P 500 slipped 0.2%, closing at its lowest level of the year for the second day in a row.
The technology-heavy Nasdaq Composite was up 0.25%.
Tuesday’s declines prolong a brutal year for financial markets. Stocks and bonds have both dropped sharply this year, an unusual tandem that reflects just how unnerved many investors feel. The Dow, the S&P and the Nasdaq are all on pace for their worst first nine months of a year since 2002. All three fell for the five straight trading days that ended Monday.
Stubbornly high inflation has roiled markets since the start of the year. The Federal Reserve in response has been raising interest rates to try to cool the economy, raising fears that the central bank will tip the U.S. into recession. Some investors hoped this summer that the rate increases might be coming to an end, and stocks rebounded briefly. Now, investors are coming to grips with the idea that bigger interest-rate increases—and weaker global economic growth—are here to stay for quite a while.
president of the Federal Reserve Bank of Minneapolis, reaffirmed the central bank’s resolve to bring down persistent and elevated inflation in a Tuesday interview with The Wall Street Journal. “There’s a lot of tightening in the pipeline,” Mr. Kashkari said, adding that the Fed is “committed to restoring price stability” but also recognizes “ there is a risk of overdoing it.”
A sharp rise in interest rates has been weighing on stocks, said
managing director at GenTrust, a registered investment adviser with about $3 billion in assets. “I think we need to start seeing the rates stabilize before we can bottom out in equities,” she added.
Faced with the uncertain macroeconomic backdrop, traders and investors were unwilling to call a bottom.
“The equity market is paying attention to this perpetual ratcheting higher of terminal rates in the U.S.,” said
head of fixed income at Mediolanum International Funds. “The more the terminal rate goes up—while necessary to deal with the inflation threat—the bigger the economic downturn will be.”
“When financial conditions are like this, historically, something always breaks,” he said.
On the economic front, data Tuesday showed that companies reduced durable goods orders for a second straight month. Home prices continued to notch big year-over-year gains, but the pace of that growth slowed. Home prices fell month over month.
However, consumers are growing more optimistic about the U.S. economy. The Conference Board’s consumer-confidence index increased in September for the second month in a row, lifted in part by falling gas prices.
Bond prices continued to fall, pushing up yields. The yield on the 10-year Treasury ticked up to 3.963%, its highest level since 2010.
Oil prices rebounded after slumping Monday to their lowest level since January. Brent crude, the international oil benchmark, rose 2.6% to $86.27 a barrel.
Global stock markets were mixed. In Europe, the Stoxx Europe 600 edged down 0.1%.
In Asia, stocks closed mostly higher. Japan’s Nikkei 225 index rose 0.5% while China’s Shanghai Composite rose 1.4%. Hong Kong’s Hang Seng Index ended the day close to flat.
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