That loud sucking sound we hear is the stock market digesting the work of a hawkish Fed that’s trying to fight unexpectedly sticky inflation.
“We expect a tumultuous year, and our plan was not to sell into extreme whooshes — I would say we are in an extreme whoosh,” Canaccord Genuity Chief Market Strategist Tony Dwyer said on Yahoo Finance Live (video above). “I would say if you are looking to cut back exposure because money availability and the outlook isn’t so great, I would love to do it on a ramp — some kind of oversold bounce — [rather] than into an extreme whoosh.”
All three major equity indices reversed positive starts on Tuesday to trade in the red for most of the day before closing mixed. Yahoo Finance’s trending tickers show big swings for various stocks for various reasons. Boeing stock popped more 5% on Tuesday after plunging roughly 9% on Monday.
The generally bearish action on Tuesday dovetailed with more notable weakness to kick off the week.
U.S. stocks sank into a bear market on Monday, with the S&P ending the session more than 20% below its recent record high in January. The apparent catalyst for the sell-off was a surprisingly hot Consumer Price Index (CPI) on Friday that stoked fresh rate hike fears.
The Nasdaq Composite fell 4.7% in the session, ending at its lowest level since September 2020. The S&P 500 dropped 3.9%.
Truist Co-Chief Investment Officer Keith Lerner told Yahoo Finance via email that a mere 4% of the S&P 500 is trading above its 50-day moving average, a clear indication of the bearishness that has gripped Wall Street amid inflation and recession fears.
Bitcoin prices also tanked below $23,000 in the broader flight to safety while shares of crypto-centric stocks such as Coinbase and Microstrategy were hammered.
Not helping market sentiment was a WSJ report late Monday that the Fed would lift rates by 75 basis points at its Wednesday meeting. Wall Street strategy teams such as Goldman Sachs and Evercore ISI promptly lifted their expectations for rate increases on the story.
“It never feels good — I changed my market opinion 50 times in the last 10 minutes,” the veteran Dwyer said about the current backdrop. “Hopefully what differentiates me and the firm is we look at the data. I have been doing this for a while, since… May of 1987, so I saw the best and the worst. I don’t remember a major market correction that didn’t end with the Fed becoming more dovish or signaling nearing the end of higher interest rates.”
This post was updated after Tuesday’s close.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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