made more than 450 points, or 1.5%, in midday trading. The S&P500
was also down about 1.5% while the Nasdaq
was down 1.3%.
There was also not much economic data for investors to focus on, except for a new housing report
, which was mixed. August housing starts were up more than 12% from July, but building permits were down 10%.
The housing numbers are unlikely to change the minds of Fed policymakers, who will announce another rate hike
Wednesday. The market is pricing in nearly an 85% chance of a third consecutive three-quarter percentage point increase.
But some believe the Fed will be even more aggressive and raise rates by an unprecedented full percentage point, or 100 basis points, mainly due to persistent inflationary pressures.
“The Consumer Price Index report has introduced a level of uncertainty about the behavior of the Fed,” said Garrett DeSimone, head of quantitative research at OptionMetrics. DeSimone said he thinks the Fed should raise rates by 100 basis points, a move that would be a “band-aid upside rip-off.”
Higher rate expectations also pushed long-term bond yields higher. The 10-year US Treasury hit 3.6% at one point on Tuesday before pulling back. This is the highest level since February 2011.
Tuesday’s market sell-off follows a modest rally
to start the week. Shares surged late in Monday’s trading session after hovering near break-even levels for most of the day.
But the market has had a tough few days, falling last week after a shocking profit warning
of fedex (FDX)
which raised more concerns about the health of the global economy
and Corporate America.
“We see a lot of the FedEx hangover continuing to trickle down to the markets,” said Anthony Denier, CEO of Webull, an online brokerage firm. “Carrying stocks are a canary in the coal mine when it comes to the economy.”
Investors are increasingly nervous. The CNN Corporate Fear and Greed Index
which examines seven market sentiment indicators, slipped further into fear territory.