Stocks waver as Wall Street braces for Fed meeting

US stocks slipped Monday, extending a run of back-and-forth trading after all three major indexes logged their worst week in three months.

The S&P 500 dipped about 0.2%, while the Dow Jones Industrial Average edged down 0.1%, or roughly 30 points. The tech-heavy Nasdaq fell 0.3%.

In the bond market, the benchmark US 10-year Treasury note spiked to 3.49%, its highest level since 2011, while the 2-year Treasury note inched past a 15-year high of 3.9%.

Investors are gearing up for the Federal Reserve’s two-day policy meeting on Sept. 20-21. The US central bank is expected to deliver a third-straight 75-basis-point increase at the conclusion of discussions on Wednesday at 2:00 pm

Higher-than-expected inflation data last week sparked a sell-off across US equity markets after renewing fears the Fed will ramp up the magnitude of its monetary tightening efforts and tip the economy into a recession. The benchmark S&P 500 shed 4.7% for the week, the Dow Jones Industrial Average fell 4.1%, and the tech-heavy Nasdaq Composite tumbled 5.5%.

A pre-earnings warning from shipping giant FedEx (FDX) also exacerbated growth concerns on Friday after the company said a global recession could be underway, withdrawing its full-year guidance on macroeconomic trends that have “significantly worsened.”

NEW YORK, NEW YORK – SEPTEMBER 16: Traders work on the floor of the New York Stock Exchange (NYSE) on September 16, 2022 in New York City. The Dow Jones Industrial Average fell again on Friday as economic concerns over inflation and global corporate profits of transport companies fell. (Photo by Spencer Platt/Getty Images)

Of S&P 500 companies that held earnings calls from June 15 through Sept. 8, 240 cited the term “recession” – the highest number citing the term since at least 2010, and well above the 5-year average of 52, according to data from FactSet research.

As investors barrel into the earnings season, Wall Street strategists are sounding the alarm on earnings expectations, with macroeconomic headwinds including inflation and rate pressures increasingly showing signs of weighing on corporate margins.

Bank of America’s Michael Hartnett warned in a recent note that earnings cuts will be the catalyst for a deeper sell-off and sees the S&P 500 teetering towards 3,600 – and even 3,000 in the bear case. As of Friday’s close, the index was at 3873.33.

As Fed worries kept investors in a risk-off mode, the sentiment was also felt across cryptocurrency markets. Bitcoin (BTC-USD) tumbled below $19,000 and Ethereum (ETH-USD) extended a slide to hover near the $1,300 level after its highly anticipated “merge” last week.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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