U.S. Stocks Turn Lower, Extending Selloff
U.S. stock indexes rebounded early Tuesday, before dropping back into negative territory, following three days of punishing declines.
The S&P 500 was recently down 0.5% in morning trading, a day after the broad index slumped 3.2% to its lowest level for the year. The technology-heavy Nasdaq Composite dropped 0.4% while the Dow Jones Industrial Average fell about 0.5%. All three indexes retreated over the course of the morning after rising at least 1.6% early.
The yield on the benchmark 10-year Treasury note edged down to 2.958% on Tuesday from 3.080% on Monday.
A cocktail of geopolitical risks and economic headwinds is posing the biggest threat to global growth in years and rattling markets. In the U.S., soaring inflation has prompted the Federal Reserve to begin raising interest rates and investors fear the move could tip the economy into recession.
Global markets are looking equally troubled. In China, resurgent Covid-19 outbreaks and Beijing’s strict approach to fighting them threaten to revive the supply chain bottlenecks that first drove inflation higher. In Europe, the war in Ukraine threatens to keep energy prices elevated and is weighing on the region’s growth.
Early Tuesday, some investors snapped up shares that had been battered by those headwinds.
“Everyone at this point is looking to see if we’ve bottomed,” said
Quincy Krosby,
Chief Equity Strategist for LPL Financial. “The instincts are that we haven’t bottomed yet.”
Investors were also looking ahead to Wednesday’s report of fresh consumer-price index data, which is expected to show inflation rose at a slower pace in April than the previous month, Ms. Krosby said.
Stocks could reverse course later as some investors look to sell their shares during a pause in the downturn, Ms. Krosby said. It is also possible for sentiment to turn on a dime, she added. In January 2019, a speech by Fed Chairman
Jerome Powell
signaled the central bank would be patient with rate increases—reversing a steep market selloff.
“This is still a traders’ market,” she cautioned.
Federal Reserve Bank of New York President
John Williams
said Tuesday that he believes the Fed can achieve a “softish landing” for the U.S. economy while raising rates, though the unemployment rate could rise.
“By 2023 you are very likely to see growth slowing very significantly, and the specter of recessions is really starting to loom,” said
Seema Shah,
chief strategist at
“What we are seeing is the realization that it is going to be very tough for the Fed to get that soft landing just right. It is not impossible but it will be a very difficult balancing act.”
Tuesday’s early gains weren’t likely to change the downward trajectory of the market, Ms. Shah said. Investors were welcoming signs that the conflict in Ukraine wasn’t escalating and a…
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