S&P 500 Slips as Intraday Turnaround Runs Out of Steam

By Yasin Ebrahim

Investing.com -- The S&P 500 fell Tuesday, as an intraday turnaround proved short-lived amid hawkish Federal Reserve commentary pointing to the need to keep tightening monetary policy boosted yields and weighed on stocks.   

The S&P 500 fell 0.91%, the Dow Jones Industrial Average was down 0.1%, or 12 points, and the Nasdaq was down 1.5%.

Federal Reserve Bank of Cleveland President Loretta Mester echoed remarks from other voting Fed members, calling on the need for monetary policy to become “more restrictive” to “put inflation on a sustainable downward path to 2%.”

The remarks come just days ahead of Thursday's inflation report that is expected to all but confirm that the Fed will hike interest rates by 75 basis points for the fourth time in a row.

In anticipation of another large rate hike, Treasury yields climbed, with the 10-year Treasury rising to 4%. 

Meta Platforms (NASDAQ:META), meanwhile, moved off fresh 52-week lows but was down more than 4% after Atlantic Equities downgraded the social media giant to underweight from neutral, citing a challenging macroeconomic environment.  

Semiconductor stocks added to their losses from a day earlier as sentiment remained bearish on the sector in the wake of the U.S. export ban on the sale of chips and other semiconductor equipment to China.

Tech has led the recent move lower, but experts remain wary of dip buying and rotating back into growth stocks on expectations that the trend of rising Treasury yields, the enemy of growth stocks, could continue.

“When rates come down, then value underperforms growth…that is what really drove that June through August rally in growth,” David Keller at StockCharts.com told Investing.com's Yasin Ebrahim in an interview on Tuesday. But “those trends have now all reversed,” according to Keller.

“Starting in early August, rates bottomed out and then rotated higher, hitting 4% on the 10-year Treasury yield...and in the last two months, value stocks have once again emerged,” he added.

Consumer staples, a defensive corner of the market, led by a 2% rally in Walgreens Boots Alliance Inc (NASDAQ:WBA) after the e drugstore chain said it had acquired healthcare firm CareCentrix. The announcement comes ahead of the company’s quarterly results due Thursday.