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U.S. Stocks Extend Sell-Off Amid Worries About Interest Rate Outlook

wallstreet oct30 06dec22 lt

Stocks moved sharply lower during trading on Tuesday, extending the sell-off seen over the course of Monday's session. The major averages all showed significant moves to the downside, with the tech-heavy Nasdaq posting a particularly steep loss.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow slumped 350.76 points or 1.0 percent to 33,596.34, the Nasdaq plunged 225.05 points or 2.0 percent to 11,014.89 and the S&P 500 tumbled 57.58 points or 1.4 percent to 3,941.26.

The extended sell-off on Wall Street reflected lingering concerns about the outlook for interest rates ahead of next week's Federal Reserve meeting.

While the Fed is widely expected to slow the pace of interest rate hikes next week, recent upbeat economic data has raised concerns about how much further the central bank will raise rates at future meetings.

Traders are likely to pay close attention to the Fed's accompanying statement, although a lot of key data will be released before the next meeting in late January/early February.

The recent selling on Wall Street partly reflects worries the Fed will be need to push the economy into a prolonged recession in order to bring inflation down close to its 2 percent target.

In U.S. economic news, the Commerce Department released a report showing the U.S. trade deficit widened in the month of October.

The report said the trade deficit widened to $78.2 billion in October from a revised $74.1 billion in September. Economists had expected the trade deficit to increase to $79.1 billion from the $73.3 billion originally reported for the previous month.

The wider trade deficit came as the value of exports slid by 0.7 percent to $256.6 billion, while the value of imports climbed by 0.6 percent to $334.8 billion.

Sector News

Oil stocks moved sharply lower over the course of the session, with another steep drop by the price of crude oil weighing the sector.

With crude for January delivery plunging $2.68 to $74.25 a barrel, the NYSE Arca Oil Index tumbled by 2.6 percent to its lowest closing level in well over a month.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 2.4 percent nosedive by the Philadelphia Semiconductor Index.

Networking stocks also showed a significant move to the downside, dragging the NYSE Arca Networking Index down 2.0 percent.

Biotechnology, retail and banking stocks also saw considerable weakness on the day, while steel and utilities stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index crept up by 0.2 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the French CAC 40 Index edged down by 0.1 percent, the U.K.'s FTSE 100 Index and the German DAX Index slid by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries showed a notable rebound following the sharp pullback seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 8.6 basis points to 3.513 percent.

Looking Ahead

The U.S. economic calendar remains relatively quiet on Wednesday, with traders likely to shrug off revised data on labor productivity and costs in the third quarter as old news.

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