Stocks flat after Monday’s rout

US stocks fell on Tuesday, adding to a rout earlier in the week as investors digest economic warnings from banking heavyweights and consider the impact of the Federal Reserve’s next policy.

The S&P 500 (^GSPC) fell 1.4%, while the Dow Jones Industrial Average (^ DJI) was down 1%, or more than 350 points. The technology-intensive Nasdaq composite (^IXIC) fell 2%.

Wall Street failed to recover from a rout in Monday’s session, when shares sank as investors pored over the early releases of a week full of economic data. Overall, the S&P 500 had its sixth day of decline in the past seven trading sessions, according to Bespoke Investment Group.

On Tuesday, Wall Street’s top bank executives hit a your pessimist for next year as inflation hits consumer demand. Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that Bank of America research showed “negative growth” in the first part of 2023, but he added that the contraction would be “light”.

Separately, Goldman Sachs CEO David Solomon told Bloomberg that he sees economic growth slowing and smaller bonuses and even possible job cuts on the horizon.

Economic data readings, however, indicated continued resilience in different pockets of the economy, prompting the market to fixate on the risk that the Federal Reserve will continue to raise interest rates throughout the month. next year.

Fed officials, including President Jerome Powell, widely suggested the central bank would downgrade to a half-point move when they meet next week after four straight 75 basis point increases. But last week’s jobs report showed solid job gains and robust wage growth, the opposite of what the Fed would like to see in its fight against inflation.

A smaller increase would signal a new phase for the central bank’s tightening campaign, but high wage pressures could lead more civil servants to raise their benchmark federal funds above 5% next year, which is currently the case. predicted by Wall Street.

“In light of the various releases, expectations for the Fed’s terminal rate set for May 2023 rose 9.5 basis points on the day to 5.01%, again crossing the 5% threshold,” wrote Jim Reid and his colleagues at Deutsche Bank in a start. morning note Tuesday.

“That’s a notable change from just before Friday’s jobs report, when it hit a low of 4.83%, and means most declines after the speech of the President Powell on Wednesday have now reversed,” he added.

Officials will get another inflation reading on Dec. 13, the first day of the Fed’s two-day policy meeting, when the Labor Department releases the consumer price index for November.

According to Mike Gormley, Equity Institutional Sales at JPMorgan, December got off to a tougher start in the markets as investors “unwind consensus macro positions this year, which have followed since the cool CPI release in mid-November.” .

In commodity markets, oil prices continued to fall on Tuesday, with WTI crude at $74.43 a barrel. Oil’s recent plunge came even amid recent moves by OPEC and its Russian-led allies to stay the course on production cuts and as Chinese officials tentatively eased COVID restrictions that have eroded the consumption of the world’s largest importer.

In the bond markets, the yield on the 10-year US Treasury fell to 3.52% on Tuesday. The dollar ticked.

In company news, PepsiCo (DYNAMISM) plans to cut hundreds of headquarters jobs at its North American snack and beverage divisions, The Wall Street Journal reported. The move follows other companies, including Walmart (WMT) and Ford (F), which have cut white-collar jobs amid economic uncertainty.

In other movements:

  • Git Lab (GTLB) shares rose 9.5% after the company reported third-quarter earnings that beat Wall Street expectations and boosted revenue forecasts in 2023.

  • Fanatics has raised approximately $700 million from a series of new and existing investors in a round that values ​​the company at $31 billion, the Wall Street Journal reported.

  • Apple (AAPL) plans to scale back ambitious self-driving plans for its future electric vehicle and postponed the car’s target launch date, Bloomberg reported.

And on the political front, Georgia voters vote Tuesday in another runoff race that will determine whether Democratic Sen. Raphael Warnock can impose a stiff arm on Republican challenger Herschel Walker. Although the Democrats have already taken control of the Senate, both parties have invested heavy resources in the race.

“Senate seats are only elected every 6 years with only a third of the chamber elected each time, a victory for either side would also make it easier for them to take control of the 2024 and 2026 elections, as this seat of Georgia would not be in the election again until 2028,” Reid and his Deutsche Bank colleagues wrote in a note.

Meanwhile, President Joe Biden visited TSMC (TSM) On Tuesday, the Arizona plant as the Taiwanese chipmaker announced it would triple its planned investment there to $40 billion. Apple CEO Tim Cook, TSMC founder Morris Chang, head of chipmaker Micron Technology Inc. (MU) CEO Sanjay Mehrotra and NVIDIA (NVDA) founder and CEO Jensen Huang, and among others, the White House said.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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