Bear Market Dives Deeper

As Federal Reserve members demonstrated a desire for more interest rate increases, even at the risk of sending the economy into a slump, Wall Street plummeted further into a bear market on Tuesday, with the S&P 500 hitting its lowest closing in over two years.

The benchmark S&P 500 has decreased by nearly 24% after closing at a record high on January 3. The index lost the final of its summer rally gains this week and closed at its lowest level since November 2020 due to the Fed’s indication that high rates would persist into 2023. Six straight sessions of drop for the S&P 500 mark its worst losing stretch since February 2020.

How Much of a Rate Hike to Expect?

Presidents of the Chicago and St. Louis Federal Reserve made their cases for more rate increases on Tuesday. At the same time, President of the St. Louis Federal Reserve James Bullard argued for additional rate increases. According to Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, although it’s upsetting, it’s not a surprise. The Federal Reserve, interest rate trends, and the state of the economy are all sources of concern for the public.

By the first quarter of 2023, according to analysts at Wells Fargo (NYSE: WFC), the Federal Reserve will raise its target range for the Fed funds rate to between 4.75% and 5.00%. Utilities and consumer staples led falls, both down around 1.7% and comprising seven of the eleven S&P 500 sector indices that saw drops.

After Sweden opened an investigation into potential sabotage following significant gas breaches in two Russian pipelines that spilled into the Baltic Sea, the energy sector index increased by 1.2%. Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA) both saw increases of 2.5% and 1.5%, respectively, supporting Nasdaq’s favorable performance.

Tesla shares were traded for more than $17 billion, more than any other stock. The standard 10-year Treasury yield in the United States increased to its highest level in more than 12 years due to the Fed members’ aggressive remarks. The S&P 500 dropped 0.21% to 3,647.29, and the Dow Jones Industrial Average dropped 0.43% to finish at 29,134.99 points. To 10,829.50, the Nasdaq Composite increased by 0.25%.

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