By Yasin Ebrahim
Investing.com – The S&P 500 moved off session lows Monday, but continued to flirt with correction territory as investors remained on edge ahead of the Federal Reserve meeting later this week.
The S&P 500 fell 1.5%, taking the index into correction territory with losses of about 10% from its recent peak. The Dow Jones Industrial Average slipped 1.2%, or 404 points, the Nasdaq slipped 1.2%, and is nearing bear market with losses of nearly 18% since its recent peak.
With just two days to go until the Federal Reserve delivers its update on monetary policy, tech stocks continue to lead the decline as many fear the U.S. central bank will lean hawkish and confirm current expectations on Wall Street for a faster pace of rate hikes.
“The January FOMC meeting should continue the Fed's hawkish policy pivot by signaling that it will soon be appropriate to begin removing accommodation,” Deutsche Bank. On the policy rate, the meeting statement and Chair Powell's press conference should confirm that liftoff is likely in March.”
U.S. bond yields, which trade inversely to prices, were in the red, but have racked up gains of late in the weeks lead up to the Fed meeting.
Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) were down more than 1%, though Meta Platforms (NASDAQ:FB) turned positive.
Netflix (NASDAQ:NFLX), which fell the most since 2012, last week following disappointing guidance, shed a further 5%, though was well off session lows.
Snap (NYSE:SNAP), meanwhile, pared some losses despite Wedbush downgrading its rating on social media stock to neutral from outperform, citing concerns over rising competition and the impact of Apple’s privacy changes.
“[W]e see risk to Snap’s revenue growth targets stemming from IDFA headwinds, difficult comps from stellar growth in 2020-21, and increasing competition from TikTok in particular,” Wedbush said in a note.
Cyclical stocks including energy and financials, which made a strong start to the year, were also hit hard.
Energy fell 2% as oil prices were pressured by rising dollar even as analysts’ continue to price in the risk of potential supply disruptions amid rising geopolitical tensions.
“The further escalation of the Ukraine conflict and the fraught security situation in the Middle East justify a risk premium on the oil price because the countries involved – Russia and the U.A.E. – are important members of OPEC+,” Commerzbank said in a note.
Kohls (NYSE:KSS), however, sidestepped the broader market selloff, rallying more than 30% on reports that the company has attracting offers from two suitors.
Peloton Interactive (NASDAQ:PTON) also gained on investor bets of the potential deal activity after activist investor Blackwells Capital urged the exercise equipment company to fire chief executive John Foley.