Wall Street update: S&P 500, Nasdaq fall on rate worries, Tesla struggles after early gains

Shares of the electric-car maker edged down 1% following strong premarket gains in the wake of a Twitter poll that showed majority of users voted for Elon Musk to step down as the CEO of the micro-blogging site.

The benchmark S&P 500 and the tech-heavy Nasdaq lost over 2% each last week after Fed Chair Jerome Powell signalled more policy tightening, and the central bank projected that interest rates would top the 5% mark in 2023, a level not seen since 2007.

S&P 500, Nasdaq fell

The S&P 500 and the tech-heavy Nasdaq 100 fell, adding to the market’s recent string of losses.

The S&P 500 fell 0.2% as of 10:20 am Eastern. The Dow Jones Industrial Average rose 60 points, or 0.2%, to 32,983 and the Nasdaq fell 0.7%. 

Small company stocks also dropped. The Russell 2000 slipped 0.4%.

Technology stocks were among the biggest losers. Declines in the shares of Apple (1.2%), Microsoft (1%) and Amazon.com weighed on both indexes.

Every major index is coming off of two weeks of losses. Markets have been slumping as hopes for a gentler Fed vanish amid stubbornly hot inflation. 

The US Federal Reserve has recently raised its forecast of how long interest rates have to stay elevated to cool inflation that has been hurting businesses and threatening spending. The European Central Bank also warned that more rate hikes are coming.

“I’m kind of more in the camp of they hike in February, and I do think they’ll hike again in March, but that’s probably it,” Matt Brill, head of US investment grade and senior portfolio manager at Invesco, said on Bloomberg Television. “We’re 90%-95% of the way done here. I think the floor has sort of been set and the worst is certainly behind us.”

But to Dennis DeBusschere, founder of 22V Research, the Fed restating their hawkish rhetoric complicates the near-term backdrop for the S&P 500.

“There is no near-term catalyst to reverse the market trend, but the downside to 3,800 is limited unless a negative catalyst appears,” he said.

Meta fell 2.9%

Facebook’s parent company fell 2.9% after the European Union accused the company of breaching antitrust rules by distorting competition in the online classified ads business.

L3Harris Technologies lost 3.4% after the US defense contractor said it would buy hypersonic engine manufacturer Aerojet Rocketdyne Holdings Inc for $4.7 billion. Aerojet added 1.6%.

US crude oil prices surged 2%. European markets gained ground and Asian markets closed lower overnight.

Treasury yields gained ground. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.58% from 3.49% late Friday.

Investors have several economic reports to review this week as they try to determine the continuing path of inflation.

The National Association of Realtors delivers its November tally of U.S. home sales Wednesday. Home sales have been falling, but prices in the housing market have remained strong.

The Conference Board will release its consumer confidence report for December on Wednesday. Consumer confidence and spending has been another strong area of the economy, but inflation is starting to put a tighter squeeze on consumers.

The government will release a closely watched monthly snapshot of consumer spending on Friday, the personal consumption expenditure price index for November. The report is monitored by the Fed as a barometer of inflation.