Stocks plunge amid surging market volatility as investors remain nervous about surging rates and await clues from the Federal Reserve on how the central bank will deal with inflation
Stocks plunged on Tuesday amid surging market volatility—a day after the three major indexes mounted an historic comeback from steep losses—as investors remain nervous about surging rates and await clues from the Federal Reserve on how the central bank will deal with inflation.
... [+]The Dow Jones Industrial Average fell 1.8%, over 600 points, while the S&P 500 lost 2.3% and the Nasdaq Composite 2.7%. in which the market staged one of its biggest comebacks in history and finished positive, despite the Dow at one point being down 1,100 points and the Nasdaq as much as 4.9%. The S&P 500, which briefly hit correction territory on Monday—down 10% from its record high at the start of 2022—fell back below that level on Tuesday amid mounting losses. Government bond yields like the U.S. 10-year Treasury note rose on Tuesday, putting added pressure on hard-hit tech stocks as investors focus on the Fed meeting and ongoing geopolitical tensions between Russia and Ukraine. Investors remain jittery as they await results from the Federal Reserve’s two-day policy meeting which kicked off on Tuesday, as the central bank cuts back on stimulus and prepares to raise interest rates in a bid to control surging inflation. Wall Street’s preferred fear gauge—the CBOE Volatility Index —surged nearly 20% on Tuesday, a day after it briefly hit its highest level in nearly 12 months.The market is on pace for its worst month since March 2020, when the U.S. economy fell into a recession during coronavirus pandemic shutdowns. All three major indexes are off to a dismal start this year. The S&P 500 is likely to fall back into correction territory on Tuesday, down more than 10% from its record high on January 3, 2022. The Dow has fallen nearly 8% so far this month, while the Nasdaq was the first index to hit correction territory last week, now down around 15% from record highs last November.“Fears of rising rates and the Federal Reserve… have caused most of the market jitters, though earnings season—albeit in the very early stages—hasn’t helped either,” says Jeff Buchbinder, equity strategist for LPL Financial. “This pullback in the S&P 500 could easily go to 10%, or even a little more,” he predicts, but not much further. Buchbinder remains optimistic in the long-term thanks to the “still solid” overall economic backdrop and the stock market’s historically strong track record early in Fed rate hike cycles.
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