US stocks ended mixed on Tuesday after a drop that sent the S&P 500 into its first bear market since the peak of the pandemic.
The S&P 500 closed down 0.4% in a fifth straight session of losses, sending the index down to 3,735.48. The S&P 500 entered its first bear market since March 2020 on Monday, as its closing price put it more than 20% below its recent record close since January. , while the Dow lost 150 points, or 0.5%, to end at 30,364.83.
The benchmark 10-year Treasury yield rose to 3.4% and hit a fresh 11-year high. The two-year yield, sensitive to monetary policy, also built on gains to hit its highest since 2007. Oil prices rose and U.S. West Texas Intermediate crude futures climbed back above 122 dollars per barrel. Bitcoin (BTC-USD) remained under pressure as prices held just above $22,000.
Volatility picked up in markets at the start of the week as investors scrambled to price in an increased likelihood of a bigger rate hike from the Federal Reserve as it races to address the inflation Market participants expect the Federal Open Market Committee (FOMC) to raise interest rates by 75 basis points this week, with CME group data showing on Tuesday that traders were pricing in a more than 90% probability of that outcome. The FOMC begins its two-day policy-setting meeting on Tuesday, with a decision and press conference by Federal Reserve Chairman Jerome Powell set for Wednesday.
NEW YORK, NEW YORK – JUNE 3: Traders work on the floor of the New York Stock Exchange (NYSE) at the start of the trading day on June 3, 2022 in New York City. (Photo by Spencer Platt/Getty Images)
Expectations of a much larger than usual rate hike soared after the The Wall Street Journal reported Monday that a 75 basis point hike was on the table among Fed officials. And talk and market pricing of this hike had already been building after the much hotter-than-expected May CPI print, and after separate surveys conducted in the days following show that consumers’ near-term inflation expectations were rising to or near all-time highs.
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“The Fed’s previous plan to raise 50 bp [basis points] meetings in June and July and then returning to 25bp increases in the fall was always dependent on inflation showing signs of cooling,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a note on Tuesday . “On the other hand, the monthly earnings. Core CPI accelerated to 0.6% in both April and May, suggesting that price pressures are broadening.”
New data on Tuesday also showed wholesale price increases also remained high last month. The producer price index (PPI) rose 10.8% in May from a year earlier after a 10.9% increase in April. according to the Bureau of Labor Statistics. Almost two-thirds of the increase in May came from a jump in prices of final demand goods, including energy, which rose 5% monthly.
In addition, other recent reports suggested that corporate concerns about inflation remained elevated. The the latest small business optimism from NFIB Tuesday’s survey showed that inflation remained the top issue reported among small business owners. The share of business owners who increased their own selling prices rose to match the survey’s 48-year all-time high.
FedEx (FDX) shares rose as much as 15.6% intraday on Tuesday after the company increased its dividend, announced it will tie executive compensation to shareholder returns and added two new board members, with a third board member on the way at a later date. The moves follow pressure for changes at the shipping giant from activist investor DE Shaw.
Oracle (ORCL) shares ended up more than 10% after the software company beat estimates for fiscal fourth-quarter sales and earnings in results delivered Monday afternoon. Cloud licensing revenue drove the pace, as sales in that unit rose 18%.
Twitter (TWTR) Staff will hear from Elon Musk this week, with the billionaire making his first appearance at a Twitter meeting since he first announced his $44 billion plan to buy the social media company in April. Insider reported on Tuesday. Shares pared earlier gains but still ended up around 0.7%.
compass (comp) and RedFin Corporation (RDFN) each announced layoffs Tuesday as a slowdown in housing market activity hit major real estate firms. Compass said it will lay off about 10% of its workforce, or about 450 positions, while RedFin said it had asked 8% of its employees to leave the company.
Coca Cola (IS) said it will delay a planned initial public offering of Coca-Cola Beverages Africa on the Johannesburg Stock Exchange until 2023 due to current market uncertainty. Shares ended down 2.7%.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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