U.S. stocks gyrated in afternoon trading to close lower with interest rate sensitive tech stocks weighing most heavily as uncertainties surrounding an increasingly hawkish Federal Reserve and rising geopolitical tensions contributed to the market’s churn. Canada’s main stock index edged higher, bouncing back from a steep sell-off earlier in the day, as resource shares benefited from geopolitical tensions boosting oil and gold prices.
In a pattern similar to Monday, U.S. stocks whipsawed between steep losses and modest gains. Equities ended well off session lows, where the S&P 500 flirted once again with confirming a correction.
All three major U.S. stock indexes closed lower.
If the bellwether index closed 10% or more below its record high reached on Jan 3, it would have confirmed it entered a correction on that date. It ended the session 9.2% below that level.
“We’re floating along this arbitrary 10% line, and investors are asking. ‘Is it time to protect my capital by selling or is it time to buy the dip?’,” said Tom Martin, senior portfolio manager at GLOBALT in Atlanta. “And between yesterday with downward and upward movement you have this battle between the two.”
The CBOE Market Volatility index closed at its highest level since Jan. 29, 2021.
The Dow Jones Industrial Average fell 66.77 points, or 0.19%, to 34,297.73, the S&P 500 lost 53.68 points, or 1.22%, to 4,356.45 and the Nasdaq Composite dropped 315.83 points, or 2.28%, to 13,539.30.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 19.68 points, or 0.1%, at 20,590.98, after declining in the five previous trading days.
The index closed 2.3% above its session low, but sentiment remained fragile amid fears that Russia will invade Ukraine and ahead of interest rate announcements on Wednesday by the Bank of Canada and the Federal Reserve.
“A lot of the direction of the markets for the rest of the week is likely going to be determined by what the Fed says or doesn’t say tomorrow,” said Angelo Kourkafas, investment strategist at Edward Jones.
Investors expect the Fed to signal an interest rate increase in March, while the Bank of Canada could hike for the first time since October 2018.
“We have sentiment that is reaching extremes in terms of investor anxiety and caution,” Kourkafas said. “Typically, that sets the stage for a rebound. Especially as we think that the fundamental backdrop remains supportive.”
The TSX energy group rose 3.6%, helped by higher oil prices. U.S. crude oil futures settled up 2.8% at $85.60 a barrel on concerns supplies could become tight due to Ukraine-Russia tensions, threats to infrastructure in the United Arab Emirates and struggles by OPEC+ to hit its targeted monthly output increase.
The materials group added 0.6% as gold benefited from its safe-haven status to reach its highest level in more than two months. Heavily-weighted financials ended 0.3% higher. Weighing on the market was renewed pressure on technology. The sector gave back its previous day’s gains, closing down 3%.
The members of the Federal Open Markets Committee (FOMC) convened on Tuesday for their two-day monetary policy meeting. Market participants on Wednesday will scrutinize the statement at the meeting’s conclusion, along with Chairman Jerome Powell’s subsequent Q&A session, for clarity regarding the central bank’s timeline for hiking key interest rates to combat inflation.
“Certainly, the economic data of late shows some weakening,” Martin added. “You would think there might be a more dovish message from the Fed.”
Geopolitical tensions are adding to investor uncertainty, with NATO putting forces on standby and the United States putting troops on heightened alert in response to a buildup of Russian forces along Ukraine border.
Those tensions prompted a rise in crude oil prices on concerns over tightening supply, which in turn gave energy companies a solid boost.
Energy was the top gainer among the 11 major sectors in the S&P 500, with tech shares suffering the largest percentage decline.
The fourth-quarter reporting season is in full-stride, with 79 of the companies in the S&P 500 having reported. Of those, 81% have delivered better-than-expected results, according to Refinitiv. But there have been notable misses, such as Netflix .
Analysts now see aggregate S&P 500 earnings growth of 24.1% for the October-December period, per Refinitiv.
General Electric Co fell 6.0% after the industrial conglomerate, weighed down by global supply disruptions, reported a decline quarterly revenue.
IBM advanced 5.7% after the IT giant beat quarterly Wall Street estimates on strength in its cloud and consulting businesses.
American Express exceeded fourth-quarter profit estimates, sending the consumer credit company’s stock up 8.9% , while Johnson & Johnson gained 2.9% after reporting it expects a jump of as much as 46% in 2022 vaccine sales.
Shares of Microsoft dropped about 5% in extended trade after the software maker reported its quarterly results.
Declining issues outnumbered advancing ones on the NYSE by a 1.34-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored decliners. The S&P 500 posted seven new 52-week highs and four new lows; the Nasdaq Composite recorded 19 new highs and 134 new lows. Volume on U.S. exchanges was 13.13 billion shares, compared with the 11.23 billion average over the last 20 trading days.
Reuters, Globe staff
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