U.S. stocks fell Tuesday after the Nasdaq Composite closed at its lowest in two years during the regular session as investors looked ahead to key inflation data and the start of earnings season.
The Dow Jones Industrial Average fell 66 points, or 0.23%, rebounding from a slump that took the index down about 200 points in premarket trading. The S&P 500 declined 0.48% while the Nasdaq Composite slipped 0.52%.
Stocks closed lower Monday, with the Nasdaq Composite falling 1% following a drop in semiconductor stocks. The Dow Jones Industrial Average shed nearly 94 points, or 0.3%, while the S&P 500 declined about 0.8%.
Bond prices also fell. The yield on the U.S. 10-year Treasury rose about five basis points to 3.937% after nearing the key 4% level overnight. Bond yields are inverse to prices, and a basis point is one hundredth of one percent.
The moves came as investors weighed comments from JPMorgan CEO Jamie Dimon, who warned that the U.S. would likely fall into a recession over the next “six to nine months,” and said the S&P 500 could fall another 20% depending on whether the Federal Reserve engineers a soft or a hard landing for the economy.
Those remarks came at the start of a big week for third quarter bank earnings, and ahead of Wednesday’s producer price report, Thursday’s consumer price index report for September and Friday’s retail sales numbers, also for last month.
Investor reaction is focused solely on how the Federal Reserve will react to the economy as it works to dampen inflation.
“This is an awful stock market environment that is grappling with a weakening economy, uncertainty over earnings and how long the Fed’s tightening will last, and sentiment issues with an extremely risk averse investor psychology,” said David Bahnsen, chief investment officer of The Bahnsen Group, in a Tuesday note.
“We believe the Fed will raise interest rates one or two more times until the Fed funds rate reaches 4% and then take a pause, at which point the Fed will assess the damage done,” he added.
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