Fed policy makers will announce another rate hike on Wednesday. The market is pricing in a nearly 85% chance of a third consecutive three-quarters of a percentage point increase, but some believe the Fed will be even more aggressive.
The Dow fell more than 313 points, or 1%. The S&P 500 ended the day down 1.1% while the tech-heavy Nasdaq finished with about a 1% loss.There were no earnings reports of note on Tuesday...although a warning from Ford about inflation and supply chain woes added to investor worries. There was also not much economic data for investors to focus on other than a new housing report, which was mixed. Housing starts for August rose more than 12% from July, but building permits were down 10%.
"The consumer price index report has introduced a level of uncertainty about how the Fed will behave," said Garrett DeSimone, head of quantitative research at OptionMetrics. DeSimone said he thinks the Fed should raise rates by 100 basis points, a move that would be a"ripping off the Band-Aid hike."Expectations for higher rates pushed long-term bond yields up as well. The 10-year US Treasury hit 3.6% at one point Tuesday before edging back.
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