Stocks fell on Tuesday as the S&P 500 dipped further into bear market territory and rates surged as investors braced for further rate hikes from the Federal Reserve.
The S&P 500 tumbled 0.38% to close at 3,735.48. The Dow Jones Industrial Average dropped 151.91 points, or 0.5%, to settle at 30,364.83. It was the fifth day of declines for the broad-market index and the 30-stock Dow. The Nasdaq Composite rose 0.18% to finish at 10,828.35.
"This is one of the days where the market is going to have to take a wait-and-see attitude and certainly that's what seems to be happening in the major indices," said Art Hogan, chief market strategist at National Securities.
"We're really stuck in middle ground here," he added, noting that back-and-forth swings are not unusual ahead of a major announcement.
Stocks hit session lows during the final hour of trading after seesawing between sharp gains and losses throughout the day. The Dow rose as much as 170 points at its high and dropped about 370 points at session lows. The S&P 500 finished the session about 22% off its highs.
The moves in equities came as rates surged again in anticipation of more aggressive tightening policies from the Fed. The 10-year rate topped 3.48% on Tuesday and hit a new 11-year high as the 2-year jumped to 3.43%.
"If the rates aren't done going up then the stock market's not done going down," said Jim Paulsen, chief investment strategist at The Leuthold Group.
Shares of Oracle jumped more than 10% after the software company reported an earnings beat boosted by a "major increase in demand" in its infrastructure cloud business. FedEx's stock saw its best day since 1986 after soaring 14% on news that the company would raise its quarterly dividend by more than 50% and add three new directors to its board.
Procter & Gamble, Coca-Cola and UnitedHealth slipped 3.1%, 2.7% and about 1.7%, respectively, dragging down the Dow. Nine of 11 sectors ended the day in the red, led by utilities and consumer staples. Dow Transports jumped more than 2%, buoyed by gains from FedEx and C.H. Robinson.
Travel stocks slipped again with shares of Norwegian Cruise Line and Royal Caribbean down roughly 3.7% and 4.4%, respectively. Delta also dipped 2.5%.
Tech saw a brief rally during the trading session, led by shares of Tesla, Microsoft and Nvidia. Growth areas like technology have suffered in recent weeks as investors rotate into safe-haven sectors like consumer staples, causing the Nasdaq to fall more than 30% off its highs.
Tuesday's moves came ahead of the Federal Reserve's closely watched policy meeting which comes to a close on Wednesday. Traders now expect a more than 90% chance of a 75-basis-point rate hike, according to the CME Group's FedWatch tool that measures pricing in the fed funds futures markets.
CNBC's Steve Liesman reported Monday that the Fed will "likely" consider a 75-basis-point increase, which is greater than the 50-basis-point hike many traders had come to expect. The Wall Street Journal reported the story first.
The Fed "has allowed inflation to get out of control. Equity and credit markets have therefore lost confidence in the Fed," wrote Pershing Square's Bill Ackman in a tweet Tuesday afternoon.
"Market confidence can be restored if the Fed takes aggressive action with 75 bps tomorrow and in July" and makes a commitment to aggressive increases until inflation "has been tamed," added Ackman.
Tuesday's market swings followed an intense sell-off that saw the S&P 500 slump 3.9% to its lowest level since March 2021 and close in bear market territory for the first time since 2020 on Monday. During that last bear market, the S&P 500 lost 33.9% before recovering, according to data compiled by S&P Dow Jones Indices. The data also showed that bear markets on average last more than 18 months.
Investors on Tuesday digested another important inflation reading of May's producer price index, which showed that wholesale prices rose 10.8% and hovered near a record pace.