S&P 500 Off Lows, but Fed Hike Fears Keep Up Pressure

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Investing.com — The S&P 500 moved off session lows Tuesday, but remained under pressure as investors upped their bearish bets on stocks on fears that the Federal Reserve may signal that aggressive rate hikes will likely continue.

The S&P 500 fell 1.2%, the Dow Jones Industrial Average slipped 1%, or 311 points, and the Nasdaq was down 0.9%.

The Fed kicked off its two-day meeting on Tuesday, and many expect that a decision to raise rates 0.75% will likely be announced and followed up with guidance that will show the central bank’s willingness to persist with the front-loading of rate hikes to combat inflation.

The Fed’s willingness to keep on tightening monetary policy has returned focus toward the growing threat of an economic recession, or landing.

“Clearly the risk is stacked towards exacerbating the slowdown into a hard landing. That is by far the bigger risk at the moment, and it increases with every rate raise into this slowing growth environment,” Will Rhind, founder and CEO, GraniteShares told Investing.com in an interview on Tuesday.

The bond market, meanwhile, continued to signal the risk of a larger recession as ongoing inversion in a key part of the Treasury Yield curve deepened to levels not seen in more than a month.

The 2-year treasury yield over 10-year Treasury yield inverted to near 50-basis points. The deeper inversion in the yield curve pressured banking stocks, with Synchrony Financial (NYSE:SYF), State Street Corp (NYSE:STT), U.S. Bancorp (NYSE:USB) down more than 2%.

Consumer discretionary stocks were one of the biggest drags on the broader market, weighed down by a 10% rout in Ford Motor Company (NYSE:F) and a more than 5% slump in General Motors (NYSE:GM).

Ford warned on performance following a $1 billion hit in the third quarter from rising supplier costs.

“Ford preannounced 3Q results, calling for Ebit adjusted ranging from $1.4 billion to $1.7 billion, considerably below ingoing consensus of $2.98 billion and our estimate of $2.93 billion,” Deutsche Bank said in a note..

Tech, however, was one of the relative outperforming sectors on the day, down just 0.6%, as Apple added to gains from a day earlier.

Apple (NASDAQ:AAPL) rose more than 1% after TF International Securities analyst Ming-Chi Kuo said that the higher-margin iPhone 14 Pro models are attracting increasing demand that could help boost iPhone revenue and average selling price.

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