January 31, 2023

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The S&P 500 is sliding, erasing previous gains, as Wall Street continues to struggle

The S&P 500 is sliding, erasing previous gains, as Wall Street continues to struggle

Stocks fluctuated on Tuesday as Wall Street shrugged off a surprise move from the Bank of Japan that sent global bond yields soaring and fears that the year-end rally may not materialize.

The Dow Jones Industrial Average rose 49 points, or 0.16%. The S&P 500 and Nasdaq Composite fell 0.004% and 0.19%, respectively. All three major averages erased the gains from the morning as investors weigh hawkish central banks and recession fears.

Overnight on Tuesday, the Bank of Japan moved to expand its cap on 10-year Japanese government bond yields, Catching merchants around the world by surprise. That added pressure from other hawkish central banks, with both the European Central Bank and Federal Reserve raising interest rates last week and stoking recession fears.

“More than 90% of central banks have raised interest rates this year, making the (mostly) coordinated global effort unprecedented,” said Lawrence Gillum, fixed income analyst at LPL Financial. “The good news? We believe we are nearing the end of interest rate hike cycles, which can reduce the headwinds we have seen in global financial markets this year.”

On Monday, the Dow Jones fell more than 162 points, or about 0.5%. The S&P 500 fell 0.9%, and the Nasdaq Composite lost nearly 1.5%. Stocks are on track to end the month and year in the red, and investors’ hopes for Santa’s ascent are fading fast.

“There is still no vision for Santa. Fasten your seatbelts,” said Louis Navellier, founder of the growth investment firm Navellier & Associates. “One would like to think that all the bad news is out there. No more Fed action until February at the earliest. We’re not giving up our loopholes but we’re certainly not regaining last week’s losses.”

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A handful of major companies will report their quarterly results this week before the Christmas holidays. General Mills will appear before the bell Tuesday. Nike and FedEx are set to report after the bell.

In economic data, homebuilding data for November is due on Tuesday morning. This week promises a lot of insight into the housing industry. Sales data for existing homes and new homes will be released on Wednesday and Friday, respectively.

The November personal consumption expenditures report, the Fed’s preferred measure of inflation, is due out on Friday.