Stocks extend losses into 2022 as investors brace for rate hikes

UPDATE: 11:30 a.m.

Shares continued to fall on Wall Street today as investors watch the latest corporate earnings and prepare for higher interest rates.

The S&P 500 fell 1%, the Nasdaq fell 1.2% and the Dow Jones Industrial Average fell 1%. Major indices have all set new lows for the year, with weakness in tech stocks giving new direction to the broader market. UnitedHealth Group, Bank of America and Proc & Gamble all rose after reporting encouraging financial results.

Bond yields fell. Household and consumer products makers gained ground.

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Shares moved lower in afternoon trading on Wall Street as investors watch the latest corporate earnings and prepare for higher interest rates.

The S&P 500 fell 0.3% as of 2:36 p.m. Eastern. The Dow Jones Industrial Average fell 183 points, or 0.5%, to 35,184 and the Nasdaq fell 0.3%.

Major indices have fluctuated between gains and losses throughout the day, with technology stocks re-directing the broader market. The sector has caused much of the turmoil in the market as investors shift money in anticipation of rising interest rates. Higher interest rates make stocks in high-flying technology companies and other expensive growth stocks relatively less attractive.

Apple fell 1.2% and chipmaker Nvidia fell 2.1%.

Stocks fell in January as investors estimate how rising inflation will affect businesses and consumers, along with the Federal Reserve’s next move on interest rate policy.

“We’ve seen some benefits from the returns we achieved last year,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “What we see is that the market is now resetting itself.”

A mix of travel-related companies and automakers fell. Ford fell 7.4% after news that it is recalling about 200,000 cars in the US to fix an issue that could prevent the brake lights from turning off.

Financial companies and technology stocks weighed on the broader market. Communications companies and makers of household goods and consumer products gained ground.

Bond yields fell. The 10-year Treasury yield fell from 1.87% at the end of Tuesday to 1.83%.

Investors are busy watching the latest round of corporate earnings. Health insurer UnitedHealth Group rose 0.3% after encouraging financial results. Bank of America rose 0.9% after reporting a rise in earnings that beat analysts’ forecasts.

Household and consumer goods company Procter & Gamble rose 3.8% after also reporting strong financial results. The maker of Dawn dishwashing liquid and other products reported strong results as it passed on higher costs to consumers.

Wall Street is closely monitoring the latest round of earnings results to gauge whether inflation is reducing profit margins for businesses and whether consumers are accepting higher prices without cutting spending. Demand for goods exceeds companies’ ability to make and supply products, leading to supply chain problems and higher raw material costs.

Economists expect inflation to remain high until those supply chain problems are resolved and consumer demand dampened. Meanwhile, the Federal Reserve is accelerating its withdrawal of support to the markets and the economy. The central bank is likely to raise interest rates earlier and more frequently than expected to curb rising inflation.

At the end of Tuesday, at its March meeting of policymakers, investors were counting on an over 86% probability that the Fed will raise short-term interest rates. A month ago, according to CME Group, they saw less than a 47% chance of this.