The U.S. stock market posted its third consecutive loss Tuesday as recession fears heightened among investors.
The Dow Jones concluded Tuesday at 33,596.34, falling by 1.03 percent or 350.76 points. The S&P 500 ended the trading session at 3,941.26, slipping 1.44 percent or 57.58 points. The tech-heavy NASDAQ Composite declined by two percent or 225.05 points, closing at 11,014.89.
Data showed all sectors, except utilities, ended the trading day in the red zone. In the S&P index, Meta Platforms Inc was one of the biggest weights, slipping 6.79 percent to 114.12. It surfaced after European Union regulators passed a regulation in which Facebook and Instagram users within the region can opt out of personalized ads.
On the other hand, the U.S. dollar strengthened against several major currencies. The euro fell 0.24 percent to $1.0466, while the Japanese yen declined by 0.21 percent to 137.03 per dollar. The U.S. currency also reigned over the sterling for the second consecutive day, despite weakening last week.
Analysts said fears of a recession remained high, even if Federal Reserve chairman Jerome Powell had indicated a slowdown in the central bank’s hawkish policy, which began in March this year. Glenmede chief investment officer of private wealth Jason Pride said that the market should acknowledge that a recession would likely be a reality.
Pride referred to the recent fall of Treasury yields, which intensified the inverted yield curve, a usually potent market indicator for a recession. The yield gap between two-year and ten-year notes was -83.7 basis points.
"During recessions, markets on average price at a discount to fair value, which they have not yet done," Pride said. "There is not a single instance in which a market has bottomed before the recession started."
Non-manufacturing PMI released on Monday revealed that the activity in the U.S. service industry had risen in November. Last week, the U.S. job report also indicated a robust market. Investors began questioning how soon the central bank would ease its tight monetary policy.
The Fed uses interest rate hikes to manage inflation, targeting a two percent rate. This strategy, however, can lead to a stagnant economy if the central bank does not pull the break at the right time.
BakerAvenue Wealth Management chief investment strategist King Lip, on the other hand, said the U.S. economy had already hit the lows. Lip described the upcoming recovery would be “choppy” instead of a straight line. However, he acknowledged that BakerAvenue’s forecast was more optimistic than the majority of the market.
Next Tuesday, the Bureau of Labor Statistics will release the November consumer price index (CPI), which can offer insights into the pace of inflation for that month. The Fed’s rate-setting meeting will also take place next week, with the majority of investors predicting a 50 basis points rate hike.
Global financial market
Like the U.S., major stock markets in other parts of the world also declined Tuesday. The STOXX 600 index in Europe closed at 438.92, falling by 0.58 percent. MSCI's all-country world index — which tracks shares in 47 countries — also posted a 1.26 percent loss. It was the index’s third consecutive loss.
The government bond yields in the European Union plunged after officials from the European Central Bank (ECB) made public statements indicating that the inflation and benchmark rates in the regions might be close to their peaks. The ECB, the Fed and the Bank of England are scheduled to meet next week to discuss their monetary policies.
Global oil prices also fell on Tuesday due to the strengthening greenback and economic uncertainty, despite the implementation of G7’s price cap on Russian oil and a projected increase in demand for oil in China.