Dow Slips Again After Entering Bear Market

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The Dow industrials and the S&P 500 fell again Tuesday as investors parsed a spate of economic data and comments from Federal Reserve officials.

All three indexes spent much of the morning in the green, but it didn’t last. The Dow Jones Industrial Average, which entered a bear market on Monday, fell 125.82 points, or 0.4%, to 29134.99. That marked its sixth consecutive day in the red.

The broad S&P 500 slipped 7.75 points, or 0.2%, to 3647.29, closing at its lowest level of the year for the second day in a row. The S&P is also now down for six days in a row, its longest losing streak since February 2020, according to Dow Jones Market Data.

The technology-heavy Nasdaq Composite rose 26.58 points, or 0.2%, to 10829.50.

Tuesday’s declines prolong a brutal year for financial markets. Stocks and bonds have both dropped sharply this year, an unusual tandem that reflects just how unnerved many investors feel. The Dow, the S&P and the Nasdaq are all on pace for their worst first nine months of a year since 2002.

Stubbornly high inflation has roiled markets since the start of the year. The Federal Reserve in response has been raising interest rates to try to cool the economy, stoking fears that the central bank will tip the U.S. into recession. Some investors hoped this summer that the rate increases might be coming to an end, and stocks rebounded briefly. Now, investors are coming to grips with the idea that bigger interest-rate increases—and weaker global economic growth—are here to stay for quite a while.

Neel Kashkari,

president of the Federal Reserve Bank of Minneapolis, reaffirmed the central bank’s resolve to bring down persistent and elevated inflation in a Tuesday interview with The Wall Street Journal. “There’s a lot of tightening in the pipeline,” Mr. Kashkari said, adding that the Fed is “committed to restoring price stability” but also recognizes “there is a risk of overdoing it.” 

A sharp rise in interest rates has been weighing on stocks, said

Mimi Duff,

managing director at GenTrust, a registered investment adviser with about $3 billion in assets. “I think we need to start seeing the rates stabilize before we can bottom out in equities,” she added. 

As markets react to interest-rate hikes and the threat of a recession, stocks have entered bear-market territory. WSJ’s Gunjan Banerji explains what it takes to push stocks back into a bull market and why it is hard to predict when they’ll turn around. Illustration: Jacob Reynolds

“The equity market is paying attention to this perpetual ratcheting higher of terminal rates in the U.S.,” said

Charles Diebel,

head of fixed income at Mediolanum International Funds. “The more the terminal rate goes up—while necessary to deal with the inflation threat—the bigger the economic downturn will be.”

On the economic front, data Tuesday showed that companies reduced durable goods orders for a second straight month. Home prices continued to notch big year-over-year gains, but the pace of that growth slowed. Home prices fell month over month.

However, consumers are growing more optimistic about the U.S. economy. The Conference Board’s consumer-confidence index increased in September for the second month in a row, lifted in part by falling gas prices.

Bond prices continued to fall, pushing up yields. The yield on the 10-year Treasury rose to 3.963%, once again hitting its highest level since 2010.

Traders worked on the floor of the New York Stock Exchange on Monday.



Photo:

REUTERS

Oil prices rebounded after slumping Monday to their lowest level since January. Brent crude, the international oil benchmark, rose 2.6% to $86.27 a barrel. 

Global stock markets were mixed. The Stoxx Europe 600 edged down 0.1%.

In Asia, stocks closed mostly higher. Japan’s Nikkei 225 index rose 0.5% while China’s Shanghai Composite rose 1.4%. Hong Kong’s Hang Seng Index ended the day close to flat.

Write to Will Horner at william.horner@wsj.com

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