By Stephen Culp
NEW YORK (Reuters) – Wall Street plunged then pared losses on Tuesday, with interest-rate sensitive tech and tech-adjacent large caps weighing heaviest as uncertainties surrounding an increasingly hawkish Federal Reserve and rising geopolitical tensions contributed to the market’s churn.
All three major U.S. stock indexes were well off the session’s lows, which saw the S&P 500 flirt once again with confirming it was in a correction, or 10% below its record high reached on Jan 3.
The bellwether index was last about 8.9% shy of its Jan 3 closing high.
The markets appeared to be on course for a repeat of Monday, when the U.S. stock market reversed steep losses and snapped a four-day losing streak which saw the S&P 500 plunge 5.7%.
“Uncertainty is what’s behind it all,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “In that uncertainly the market becomes a flock (of) sheep. Selling begets more selling, and it’s driven by the Fed, inflation, and geopolitical tensions.”
The members of the Federal Open Markets Committee (FOMC) convene on Tuesday for their two-day monetary policy meeting, and on Wednesday market participants will scrutinize the statement at the meeting’s conclusion, along with Chairman Jerome Powell’s subsequent Q&A session, for clarity regarding the central bank’s timeline for hiking key interest rates to combat inflation.
“Hopefully we’ll get clarity on Wednesday from the Federal Reserve, although I think we’ll end up with more questions than answers about where the Fed is likely to take interest rates in 2022,” Pavlik added.
The Dow Jones Industrial Average fell 94.28 points, or 0.27%, to 34,270.22, the S&P 500 lost 44.38 points, or 1.01%, to 4,365.75 and the Nasdaq Composite dropped 244.15 points, or 1.76%, to 13,610.98.
Geopolitical tensions are adding to investor uncertainty, with NATO putting forces on standby and the United States putting troops on heightened alert in response to a buildup of Russian forces along Ukraine border.
Those tensions prompted a rise in crude oil prices on concerns over tightening supply, which in turn gave energy companies a solid boost.
Energy was the top gainer among the 11 major sectors in the S&P 500, with tech shares suffering the largest percentage decline.
The fourth-quarter reporting season is in full-stride, with 79 of the companies in the S&P 500 having reported. Of those, 81% have delivered better-than-expected results, according to Refinitiv.
Analysts now see aggregate S&P 500 earnings growth of 24.1% for the October-December period, per Revinitiv.
The fourth-quarter earnings season has started off on a mixed note, with all eyes now on mega-cap growth company Microsoft’s earnings after market close on Tuesday, followed by Apple and Tesla later this week.
General Electric Co fell 6.3% after the industrial conglomerate, weighed down by global supply disruptions, reported a decline quarterly revenue.
IBM advanced 5.1% after the IT giant beat quarterly Wall Street estimates on strength in its cloud and consulting businesses.
American Express exceeded fourth-quarter profit estimates, sending the consumer credit company’s stock up 7.8%, while Johnson & Johnson gained 2.5% after reporting it expects a jump of as much as 46% in 2022 vaccine sales.
Declining issues outnumbered advancing ones on the NYSE by a 1.63-to-1 ratio; on Nasdaq, a 1.73-to-1 ratio favored decliners.
The S&P 500 posted 3 new 52-week highs and four new lows; the Nasdaq Composite recorded 10 new highs and 120 new lows.
(Reporting by Stephen Culp; additional reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Cynthia Osterman)
