US stocks declined on Tuesday, with technology companies dragging major indexes lower as investors remain concerned about the economy ahead of the Federal Reserve’s Wednesday decision.
The S&P 500 Index fell 1% as of 10:26 a.m. in New York. The tech-heavy Nasdaq 100 Index declined 1.7%. The blue-chip Dow Jones Industrial Average shed 0.4%.
The Fed, on Wednesday, is expected to hold interest rates steady and its quarterly dot plot should give investors more insight into the outlook for the economy. Some investors are hoping that last week’s rapid stock market selloff prompts a Fed put, but Bloomberg economists don’t expect any sort of reassurance at this week’s meeting.
Traders are also monitoring recent developments in the Mideast after Israel launched a series of airstrikes in Gaza, breaking an almost-two-month ceasefire. Meanwhile, Russian President Vladimir Putin is demanding a suspension of all weapons deliveries to Ukraine during a ceasefire proposed by US counterpart Donald Trump.
“Because investors’ favorite stocks – and those with a heavy weighting in the index – have suffered so much, it’s likely impacting investor sentiment disproportionately vs. an otherwise more orderly decline,” Bret Kenwell, US investment analyst at eToro wrote in a note to clients.
Kenwell added that similar levels in sentiment have coincided with at least a short-term bottom in US stocks.
“Although it’s not clear that we’ve seen a capitulatory type move that generally marks the bottom,” he said.
To Buy or Not to Buy
Uncertainty over geopolitics and the Fed’s interest-rate decision overshadowed better-than-expected factory output data that eased concern of weakening manufacturing. Other data that released Tuesday showed a rebound in US home construction.
Adding to the market’s dented sentiment, Treasury Secretary Scott Bessent said that while the underlying economy is healthy and there’s no reason for the US to see a recession, he can’t guarantee it.
Traders continue to be conflicted on whether it’s time to buy the dip. A Bank of America survey shows the biggest-ever drop in US equity allocations, with fund managers reporting a 23% underweight US stocks. Meanwhile, company executives are using the declines to buy US stocks, sending a sign of confidence for equity bulls.