© Reuters Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, September 26, 2022. REUTERS/Brendan McDermid
By Shreyashi Sanyal and Ankika Biswas
(Reuters) – Wall Street’s major indexes plunged into a bear market on Tuesday after an early rally in stocks collapsed after Federal Reserve policymakers hinted that further interest rate hikes could threaten economic growth.
The gauge’s low trading at the end of November 2020 erased gains of up to 1.7 percent in the early afternoon, leaving investors worried about how much more stocks could fall before stabilizing.
St. Louis Fed President James Bullard made the case for more rate hikes, while Chicago Fed President Charles Evans said the central bank should raise rates by at least another percentage point this year.
Analysts at Wells Fargo (NYSE: ) now sees the U.S. central bank taking the federal funds rate to 4.75%-5.00% in the first quarter of 2023.
“It’s a continuation of Jerome Powell’s digging and trying to properly inform markets, investors and the world that this inflation story is still out of control… It will be interesting,” said Brandon Pizzuro, director of public investments at GuideStone Capital Management, to see if markets end up in the red today.
Pizarro warned of more suffering for justice and “the worst is in front of us, not behind us.”
Most S&P 500 sector indexes turned lower, with the energy sector clinging to a 1.19% gain.
Rating-sensitive stocks including Amazon.com Inc (NASDAQ: ), Apple Inc (NASDAQ: Microsoft Corporation (NASDAQ: ), Meta Platforms Inc and Tesla (NASDAQ: ) Inc , posted early gains.
The gauge hit its highest level in more than 12 years amid dovish comments from Fed officials. [US/]
At 12:31 p.m. ET, the S&P 500 was down 164.66 points, or 0.56%, at 29,096.15, while the S&P 500 was down 17.49 points, or 0.48%, at 3,637.55, and down 21.24 points, or 0.10%, at 8.
Concerns about rising corporate profits, a recession and higher interest rates have weighed on Wall Street over the past two weeks.
Analysts cut expectations for S&P 500 earnings for the third and fourth quarters and for the full year. For the third quarter, the profits of S&P 500 companies were seen growing by just 4.6% year-over-year, compared to the 11.1% growth expected in early July.
Declining issues outnumbered advancing ones for a 1.29-to-1 ratio on the NYSE. Improving issues outnumbered declining ones on the Nasdaq by a 1.01-to-1 ratio.
The S&P index posted no new 52-week highs and 113 new lows, while the Nasdaq posted 24 new highs and 323 new lows.