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U.S. stocks were mixed in the final hour of trading Tuesday after the S&P 500 slid to a new closing low and the Dow Jones Industrial Average entered an official bear market – a drop of 20% or more from a broad market index’s most recent high.

The S&P 500 was off by roughly 0.2%, while the Dow Jones Industrial fell about 100 points, or 0.4%. The tech-heavy Nasdaq Composite was an outlier — up about 0.2%.

 
 

The CBOE Volatility Index (^VIX), which measures Wall Street’s expectations for short-term market volatility, continued its climb to top 32, its highest reading since June 17. Treasury yields also resumed their ascent, with the 10-year note narrowing on 4% — the highest since 2010 — and the 2-year Treasury note above 4.3%, a 15-year high.

On Tuesday, Chicago Fed President Charles Evans said while speaking at a forum in London that the U.S. central bank will need to raise interest rates by at least another percentage point this year but does not see the labor market heading into “recession-like” conditions.

Tuesday’s moves come as Wall Street increasingly anticipates the Federal Reserve’s rate-hiking campaign to fight inflation will result in an economic downturn. Chair Jerome Powell repeatedly warned of some “pain” in a speech last week following the central bank’s latest policy announcement.

“We have always understood that restoring price stability while achieving a relatively modest decline in unemployment and a soft landing would be very challenging and we don’t know whether this process will lead to a recession or if so, how significant that recession would be,” he said.

As the major averages slipped below their June 16 lows, strategists are wondering how much lower the indexes have to fall as Fed policymakers proceed with more rate increases and, on the corporate side, analysts begin to slash earnings expectations.

Morgan Stanley’s Mike Wilson, among the most bearish of analysts on stocks, expects an acceleration in downward earnings revisions in coming months will push stocks lower, projecting that the S&P 500 will reach a range of 3,000-3,400 later this fall.

Meanwhile, Chris Larkin, managing director of trading at Morgan Stanley’s E*TRADE, was more optimistic.

He said in a note: “Many traders and investors may not have noticed that last week’s slide put the SPX back below its bear-market threshold, and as unwelcome the milestone may be, historical tendencies show the worst was often over by the time the SPX first hit the bear-market threshold — which in this case, was a little more than three months ago.”

Original Article – Yahoo Finance

 

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