U.S. markets were poised for modest recovery Tuesday, a day after intensifying inflation fears spurred a dizzying sell-off that shoved the S&P 500 into bear market territory.
Investors remain laser focused on the Federal Reserve’s policy meeting today and Wednesday, as the central bank is expected to again raise rates in an effort to tamp down surging prices.
The central bank had long been expected to raise rates by half a percentage point, but a JPMorgan Chase research note issued Monday raised speculation the Fed could move even more aggressively and go with three-quarters of a percentage point, or more.
The note suggested that a sense of urgency could be settling in at the Fed.
The S&P 500, which plunged 3.9% Monday to push into bear market territory – defined as a 20% drop from a recent high – edged up 0.3% in premarket trading Tuesday.
The Dow Jones industrial average and tech-centric Nasdaq composite climbed 0.2% and 0.4% premarket, respectively, after sustaining heavy losses a day earlier.
The three indexes come into Tuesday’s session with deep deficits on the year: The S&P 500 has slumped 21% in 2022 and the Dow 16%. The Nasdaq, deep into its own bear market, has shed nearly 31%.
Cryptocurrencies continued their precipitous plunge as investors flocked for safer ground, with bitcoin careening below $22,000. Back in November, it was trading above $65,000.
“Investors look as if they increasingly fear the central bank will become more aggressive with the pace of interest rates to try and curb inflation, given May’s cost of living figures were higher than expected,” Russ Mould, investment director at AJ Bell, said in commentary Tuesday.
“A decision to raise rates by more than half a percentage point could cause chaos on the markets and put a bigger dent into investors’ portfolios than they’ve already seen this year.”
The Fed’s campaign is putting immense pressure on the stock market, and there are concerns the U.S. economy could be tilting toward a recession.
2022 has already delivered a nonstop storm of uncertainty for investors and companies, from a vexed supply chain to labor shortages, soaring prices and the vast fallout from the war in Ukraine.
Now, the outlook is only getting tougher.
The national average for gas surpassed $5.01 Tuesday, another fresh high according to data tracked by AAA. A year ago, the national average was $3.08.