The New York Stock Exchange ended lower on Tuesday, with the Dow Jones managing to limit losses while the Nasdaq plunged, ahead of a Fed meeting and amid geopolitical tensions.
According to final results, the Dow Jones index, which dropped almost 2% in the first part of the session, regained most of the ground lost shortly before the close to end down 0.19% at 34,297.73 points. The Nasdaq, down 3% at the worst of the day, ended in a loss of 2.28% to 13,539.29 points.
The S&P 500 ended down 1.22% at 4,356.45 points.
Wall Street played out a scenario partly similar to the day before, with indexes at session lows rising as the close nears, when low stock prices once again attract bargain-hunting investors.
But this time around, the tech-dominated Nasdaq remained clearly in the red.
“Investors remained on their toes amid geopolitical tensions and the US central bank’s announcement” expected on Wednesday, Wells Fargo analysts said.
The Fed began a monetary policy meeting on Tuesday and is expected to issue an official statement midday on Wednesday, ahead of a press conference by Chairman Jerome Powell at 7:30 p.m. GMT.
If an immediate increase in interest rates on federal funds is not on the agenda, the monetary institution should give clues about the volume and pace of monetary tightening to come.
While so far, the Fed had hinted that it would proceed with three increases of a quarter of a percentage point (0.25%) over the year, the markets are now betting mostly on four increases.
By increasing the cost of money, rate hikes appear to be unfavorable to companies, to their future results and therefore to their actions.
But for Peter Cardillo of Spartan Capital Securities, investors’ main worry on Tuesday was the escalation of political tensions around Ukraine.
“The biggest fear is the prospect of an imminent war between Ukraine and Russia. That’s why we have this volatility,” the analyst said.
“If heavy sanctions are imposed on Russia, it could affect the oil market and cause oil prices to rise far beyond what we expect,” Cardillo said. “It would be negative for the economy.”
The United States has said it is ready, in the event of a Russian attack on Ukraine, to ban the export of American technology to Russia.
Oil prices rose sharply on Tuesday, supported by the Ukrainian crisis. The energy sector was the only S&P sector to end up on Wall Street (+3.96%) along with banking (+0.47%).
The nine other sectors were down, starting with those of information technology (-2.34%) and communication services (-2.24%), which form the heart of the Nasdaq index.
Bond yields on 10-year Treasury bills, which move inversely to price, remained stable at 1.77%, but those on shorter-term bills (2 years) rose sharply to 1.02% against 0.97% the day before.
The International Monetary Fund (IMF) cast a shadow over the outlook for 2022 with global growth revised down half a percentage point to 4.4%. US GDP growth should not exceed 4% this year against 5.2% expected three months ago.
IMF chief economist Gita Gopinath has warned that central bank rate hikes risk causing market corrections. “There is huge uncertainty,” Ms. Gopinath acknowledged. “All of this is affecting the markets and coming on top of other events, like the geopolitical tensions that we are seeing around the world.”
In terms of equities, as the earnings season is in full swing, the groups 3M (-0.55% to $173.75), American Express (+8.92% to $173.11) and Johnson and Johnson (+2.86% to 167.63 dollars) all announced better than expected quarterly results, although the pharmaceutical group disappointed in terms of turnover.
The title of the American aeronautics and defense company Raytheon Technologies advanced 2.49% to 90.31 dollars despite mixed results for 2021 and disappointing forecasts for the current year.
Shares of smart exercise bike maker Peloton, which had strong success at the start of the pandemic but faced a drop in demand, continued to fall (-10.70% to $26.53) .