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Stock Market News for Sep 21, 2022

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U.S. stocks closed sharply lower on Tuesday as Treasury yields rose, with worries once again mounting among investors as they brace for another steep rate hike due on Wednesday from the Fed. All three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) slid 1% or 313.45 points to end at 30,706.23 points. The blue-chip index at one point had dropped as much as 550 points before paring some of the losses.

The S&P 500 declined 1.1% or 43.96 points to close at 3,855.93 points. Real estate and materials stocks were the worst performers.

The Real Estate Select Sector SPDR (XLRE) lost 2.6%, while the Materials Select Sector SPDR (XLB) declined 1.9%. The Financials Select Sector SPDR (XLF) fell 1.5%.  All 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq fell 1% or 109.97 points to finish at 11,425.05 points.

The fear-gauge CBOE Volatility Index (VIX) was up 5.43 % to 27.16. A total of 9.90 billion shares were traded on Tuesday, lower than the last 20-session average of 10.71 billion.

Investors Brace for Another Steep Rate Hike

The overall sentiment remained negative almost throughout Tuesday’s trading session as the Federal Open Markets Committee (“FOMC”) began its two-day policy meeting. Investors are not only trying to gauge if the Fed will hike interest rates by 75 basis points or 100 basis points but also are expecting to get a clear picture of how high the Fed can go in increasing rates in the future.

Stocks have been taking a hit in recent weeks on fears that steep interest rate hikes may push the economy into further slowdown. The fears started escalating after the consumer price index reading in August came in hotter than expected and Fed Chair Jerome Powell said that the Fed will continue with its aggressive rate-hike stance so long it gets full control over soaring inflation.

This made investors brace for another steep rate hike. These fears continued to rattle markets on Tuesday, with the 2-year Treasury yield hitting 3.99%, its highest level since 2007. The 10-year Treasury yield rose 5 basis points to hit 3.6%, its highest level since 2011.

Tech stocks once again took a hit following this. Shares of Alphabet Inc. (GOOGL - Free Report) fell 1.9%, while Meta Platforms, Inc. (META - Free Report) fell 1.3%. Alphabet has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Real estate stocks were one of the worst performers on Tuesday. Shares of D.R. Horton, Inc. (DHI - Free Report) declined 1.6%, while KB Home (KBH - Free Report) fell 2.1%.

Economic Data

Housing data released on Tuesday showed building permits in August declined 10% from the previous month to 1.517 million, the steepest decline since April 2020. However, housing starts unexpectedly jumped 12% in August to 1.575 million.

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