U.S. stocks fell on Tuesday as investors weighed hawkish remarks made by Federal Reserve Governor Lael Brainard that indicated policymakers were ready to raise interest rates more aggressively to rein in inflation. Investors also braced for the likelihood of new sanctions on Russia by the European Union and continued to monitor the closely-watched yield curve.
The S&P 500 fell roughly 0.9%, and the Dow Jones Industrial Average dipped 0.4%. The Nasdaq Composite tumbled 2% in its biggest drop in three weeks, erasing gains from a rally in the previous trading session prompted by a 27% surge in Twitter (TWTR) that came after Tesla (TSLA) CEO Elon Musk revealed he purchased a 9.2% stake in the social media company. Twitter again inched higher on Tuesday after the company said it would name musk to its board a day after the Tesla boss disclosed his stake. However, the tech sector saw a broad-based decline in intraday trading.
Musk is “speaking with his money by saying that Twitter is an undervalued platform,” MKM Partners’ Rohit Kulkarni told Yahoo Finance Live. “He sees there are things they can do to improve the service, and he’s definitely hinting at a more active role.”
Wedbush Securities analyst and Tesla bull Dan Ives also told Yahoo Finance he predicts Musk will have an active stake in the social media platform over the coming weeks or months, and that his recent snap up of shares was “just the appetizer.”
Separately, Musk’s own company, electric-vehicle giant Tesla, contributed to the gains that propelled a take-off for tech during Monday’s trading session. Shares of the EV carmaker jumped nearly 6% after it reported vehicle delivery figures this weekend that came in higher than the same period last year.
Recession jitters were at bay on Monday after a closely-monitored portion of the Treasury yield curve inverted last week and spooked investors over the possibility of an imminent economic contraction. The phenomenon has a history of predicting a recession, with each of the last eight slowdowns dating back to 1969 preceded by a yield curve inversion. As of Monday morning, the yield on the benchmark 10-year note remained below that on the shorter-term 2-year note.
Still, worries about an economic downturn were not completely off the table for strategists.
Nomura Chief U.S. economist Robert Dent told Yahoo Finance Live he sees the potential for a “mild recession”
“We think that the cumulative risk of a recession between now and the end of 2024 stands at about 35% to 40%,” he said. “A lot of that is just coming from what we think is going to be this very aggressive response from the Fed to actually get inflation under control and make sure the labor market actually cools down.”
Uncertainty around the crisis in Eastern Europe also continues to be a headwind for investors. JPMorgan CEO Jamie Dimon in his widely-read shareholder letter warned that the war in Ukraine is likely to meaningfully slow the U.S. and global economy. In the U.S. specifically, the bank estimates the U.S. economy will grow roughly 2.5%, a downgrade from the institution’s initial GDP forecast of 3%, with larger cuts to forecasts on Russia and Europe’s economic outlooks.
“We do not know what its outcome ultimately will be, but the hostilities in Ukraine and the sanctions on Russia are already having a substantial economic impact,” said Dimon, adding that “many more” sanctions could be imposed on Russia and spur further unpredictability.
The European Union addressed apparent war crimes in Ukraine on Monday, indicating in a statement that officials would, “work on further sanctions against Russia” over the country’s targeted attacks on civilians. Some major European officials including Germany’s defense minister said they would support banning Russian natural gas — a move previously excluded from sanctions as Russia supplies about 40% of Europe’s gas energy.
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12:27 p.m. ET: Chipmakers post biggest drop in nearly one month as tech stocks fall
Shares of semiconductor companies declined in intraday trading, weighed down by a broad-based decline in technology stocks.
The Philadelphia Stock Exchange Semiconductor Index fell as much as 4.1% to register its biggest intraday percentage decline in nearly a month.
Notable laggards in the sector included Nvidia (NVDA), down 4.2% to $262.07 per share; Lam Research (LCRX), down 5.5% to $505.92 per share; and Marvell Technology (MRVL) down 6.3% to $68.30 as of 12:27 p.m. ET.
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12:19 p.m. ET: Stocks turn lower following two days of gains
Here were the main moves in markets as of 12:18 p.m. ET:
S&P 500 (^GSPC): -32.28 (-0.70%) to 4,550.36
Dow (^DJI): -86.23 (-0.25%) to 34,835.65
Nasdaq (^IXIC): -261.54 (-1.80%) to 14,271.01
Crude (CL=F): -$0.43 (-0.42%) to $102.85 a barrel
Gold (GC=F): -$10.30 (-0.53%) to $1,923.70 per ounce
10-year Treasury (^TNX): +14.6 bps to yield 2.5580%
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10:43 a.m. ET: US service sector activity picks up in March but higher costs persist
Activity in the U.S. services industry regained speed last month thanks to a boost from further rollbacks of COVID restrictions, but businesses continued to face higher costs as supply chain constraints weighed on prices.
The Institute for Supply Management (ISM) reported its non-manufacturing activity index rebounded to a reading of 58.3 last month from a one-year low of 56.5 in February.
That increase capped three straight months of declines in the index and underscored a shift in spending back to services from goods.
Economists surveyed by Bloomberg had forecast the non-manufacturing index rising to 58.5. Readings above 50 indicate expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity.
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10:33 a.m. ET: Fed gov Brainard says central bank is ready for “stronger actions” on inflation
Federal Reserve Governor Lael Brainard said the central bank can raise interest rates more aggressively to dampen the high rate of inflation felt by Americans.
Brainard added that policymakers are attuned to the disparate impacts of rising prices, particularly on lower-income households.
“Currently, inflation is much too high and is subject to upside risks,” Brainard said at a conference Tuesday. “The Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.”
Inflation data released last week showed prices in the United States rising by 6.4% on a year-over-year basis in February, the fastest pace since 1982.
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10:23 a.m. ET: Twitter to name Elon Musk to board after Tesla CEO reveals 9.2% stake
Twitter Inc. (TWTR) announced the company will appoint Tesla Chief Executive Officer Elon Musk to its board, one day after he disclosed a significant stake in the social media company.
The move may temporarily block Musk from proposing a takeover bid, which analysts and investors have speculated may occur after the Tesla CEO revealed his purchase of about $3 billion in shares of Twitter.
According to a filing, Musk cannot own more than 14.9% of Twitter’s common stock either as an individual shareholder or as a member of a group as long as he is the director of Twitter.
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9:30 a.m. ET: Stocks dip as investors tune in for more possible sanctions against Russia
Here were the main moves in markets during Tuesday’s open:
S&P 500 (^GSPC): -12.78 (-0.28%) to 4,569.86
Dow (^DJI): -90.43 (-0.26%) to 34,831.45
Nasdaq (^IXIC): +271.05 (+1.90%) to 14,532.55
Crude (CL=F): +$0.83 (+0.80%) to $104.11 a barrel
Gold (GC=F): +$5.50 (+0.28%) to $1,939.50 per ounce
10-year Treasury (^TNX): +4.6 bps to yield 2.4580%
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7:50 a.m. ET: US stops Russian bond payments in move aimed to ramp up pressure on Moscow
The United States stopped the Russian government on Monday from paying holders of its sovereign debt more than $600 million from reserves held at U.S. banks in a bid to place pressure on Moscow.
Foreign currency reserves held by the Russian central bank at U.S. financial institutions were frozen on Feb. 24 as part of sanctions placed on Moscow for over its invasion of Ukraine.
The U.S. Treasury Department, however, had been permitting the Russian government to use funds to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis.
On Monday, the U.S. government moved to cut off Moscow’s access to the frozen funds as a $552.4 million principal payment on a maturing bond came due.
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7:10 a.m. ET: Stock futures slip, oil rises following Monday’s tech rally
Here were the main moves in futures trading ahead of Tuesday’s open:
S&P 500 futures (ES=F): -10.50 points (-0.23%) to 4,567.25
Dow futures (YM=F): -83.00 points (-0.24%) to 34,746.00
Nasdaq futures (NQ=F): -37.75 points (-0.25%) to 15,126.50
Crude (CL=F): +$1.28 (+1.24%) to $104.56 a barrel
Gold (GC=F): -$1.70 (-0.09%) to $1,932.30 per ounce
10-year Treasury (^TNX): 0.00 bps to yield 2.4120%
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6:12 p.m. ET Monday: Futures open little changed after stocks close higher
Here’s where markets were trading ahead of the overnight session on Monday:
S&P 500 futures (ES=F): -2.25 points (-0.05%) to 4,575.75
Dow futures (YM=F): -14.00 points (-0.04%) to 34,815.00
Nasdaq futures (NQ=F): -9.25 points (-0.06%) to 15,155.00
Crude (CL=F): +$0.43 (+0.42%) to $103.71 a barrel
Gold (GC=F): +$3.30 (+0.01%) to $1,937.30 per ounce
10-year Treasury (^TNX): +3.5 bps to yield 2.4120%
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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