U.S. stocks traded lower Tuesday ahead of the Federal Reserve’s two-day policy meeting, which is expected to end with the central bank signaling a faster wind-down of its bond-buying program.
The S&P 500 fell 1.3% Tuesday afternoon. The index also declined Monday, pulling the gauge back from a record high notched last week. The tech-focused Nasdaq Composite Index fell 2%, while the Dow Jones Industrial Average slipped 0.5%.
Investors are watching to see if the uptick in Covid-19 cases and the new Omicron variant change how quickly the Fed will end easy-money policies that have helped fuel this year’s stock rally. The central bank, which concludes its meeting Wednesday, could also signal that it will raise interest rates sooner than expected next year to try to curb inflation.
“It’s a fairly challenging backdrop for the market,” said Hani Redha, a portfolio manager at PineBridge Investments. “Things have been fairly directionless in the lead-up to this. The market wants to see confirmation of what they’re going to do.”
Inflation worries continue to be top of mind for many investors. The Labor Department said Tuesday that its producer-price index rose 0.8% in November from the prior month. It measures the prices that suppliers charge businesses and other customers.
Inflation is likely to persist into 2022,, said
Joseph Amato,
president of Neuberger Berman Group LLC. Mr. Amato said 2022 is slated to be a transition year in which returns in the equity market might not be as strong as they were in the past few years.
“You’re going from massive and long-term monetary stimulus — and more recently fiscal stimulus — to a period where you’re going to see stimulus coming out of the system,” Mr. Amato said.
In recent weeks, stocks have swung back and forth amid conflicting headlines on the Omicron variant and mixed signals on the health of the economy. On Tuesday,
said preliminary laboratory tests gave encouraging signs that the company’s experimental Covid-19 pill for the newly infected could work against Omicron. Pfizer shares rose 1.1%.
Shares of meme stocks
and
were volatile after early declines. AMC rose 3.4% in the afternoon, and GameStop also gained 3.4%. Both companies reported news last week that hurt their share prices: GameStop posted a widening quarterly loss and AMC disclosed that its chief executive and chief financial officer had sold a combined $10.2 million of stock.
Tesla shares edged down 3% after CEO Elon Musk sold more stock Monday. Dogecoin jumped as much as 40% after Mr. Musk tweeted early Tuesday that Tesla would make some merchandise buyable with the cryptocurrency.
In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.439% from 1.423% Monday. Yields and prices move inversely.
Brent crude futures, the benchmark in global oil markets, declined 1.8% to $73.02 a barrel. On Tuesday, the International Energy Agency said Omicron’s emergence would “temporarily slow, but not upend, the recovery in oil demand.”
Overseas, the Stoxx Europe 600 index fell 0.8%. Major stock indexes in Asia also closed lower. Hong Kong’s Hang Seng contracted 1.3% and Japan’s Nikkei 225 shed 0.7%. China’s Shanghai Composite and South Korea’s Kospi each declined about 0.5%.
—Caitlin Ostroff contributed to this article.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com
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