US Stocks Fluctuate After Labor Day Weekend

US stock indexes fluctuated, buoyed by expectations of tighter Federal Reserve policy and an energy crisis in Europe.

The S&P 500 fell 0.7% on Tuesday after the long Labor Day weekend after a turbulent session on Friday dragged major indices lower. The Dow Jones Industrial Average was also down 0.7%, while the tech-heavy Nasdaq Composite lost 1.2%. Major indices have fallen every three weeks in a row.

Moves in the US were accompanied by similar gains in European markets, which rebounded after falling on Monday after Russia indefinitely halted natural gas flows through a major pipeline. The pan-continental Stoxx Europe 600 rose less than 0.1%, while the German DAX gained 0.4%. The British pound was flat after recently falling to its lowest level since 1985 against the US dollar.

Equities around the world have come under pressure in recent weeks as concerns about tighter monetary policy in the US and a weakening economic outlook in Europe have prompted investors to sell off riskier assets.

Many investors say they have given up hope that the US stock market’s rapid rise from mid-June to mid-August was the start of a new bull market, and have instead accepted that this is likely a bear market rally. The S&P 500 is already down more than 8% from its August peak based on Friday’s close.

Much of the recent concern in the US has been fueled by expectations that the Fed will pursue tighter monetary policy for much longer than initially thought. Many investors are now expecting the Fed to hike rates by 0.75 percentage points for the third consecutive month at its meeting later this month. Federal funds futures, used by traders to bet on the direction of monetary policy, showed a 70% chance Tuesday morning of this happening.

Many investors fear that continued aggressive rate hikes will plunge the US economy into a prolonged downturn. Consumers are already feeling particularly down and analysts have started lowering their third-quarter earnings estimates.

“As business and consumer pressures mount and the downturn deepens, it will weigh on stock prices,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “There is still work to be done on falling stocks given how much prices have risen during the pandemic.”

In the US bond market, the yield on the two-year Treasury bills, which is more sensitive to the Fed’s near-term expectations, rose to 3.480% from 3.398% on Friday. Meanwhile, the yield on the benchmark 10-year bond rose to 3.317% from 3.190%. Yields rise when bond prices fall.

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

Photo: Spencer Platt/Getty Images

In energy markets, Brent crude slipped 2.2% to $93.62 a barrel amid growing concerns that lockdowns in China could slow demand. Meanwhile, benchmark European gas prices fell about 8% after rising a third on Monday.

The easing in prices in energy markets on Tuesday was one of the catalysts for the recovery in European equities, Ms Streeter said. Attention is now focused on the European Central Bank’s interest rate decision due on Thursday. In the UK, many investors are also focused on the agenda of Liz Truss, who won the race to lead the ruling Conservative Party and become Britain’s next prime minister.

In Asia, Hong Kong’s Hang Seng fell 0.1%, while China’s Shanghai Composite rose 1.4%. Japan’s Nikkei 225 ended roughly unchanged.

Write to Caitlin McCabe at [email protected]

We want to hear from you

What is your investment strategy for 2022? Has the recent market turmoil changed your approach? Tell us about your experiences here.

household income level

Pick one…0 – $47,900 $48,000 – $75,300 $75,400 – $127,300 $127,400 – $188,400 $188,500 and up

Surname

Age

profession

city-state

E-mail

By submitting your response to this questionnaire, you consent to Dow Jones processing your special categories of personal information, you consent that your responses may be investigated and published by The Wall Street Journal, and you consent to be interviewed by a reporter from The Wall Street Journal Journals to be contacted to discuss your dates Reply further. In an article on this subject, the Journal will not attribute your responses to you by name unless a reporter contacts you and you consent to do so.