TOKYO, Jan 6 (Reuters) – Asian equities gained on Friday while the dollar hovered near a one-month high as investors braced for crucial U.S. jobs data later in the day that should provide clues on how aggressive the Federal Reserve will be in tightening policy.

Japan’s Nikkei (.N225) rose 0.39%, while South Korea’s Kospi (.KS11) jumped 0.77%. Australia’s stock benchmark (.AXJO) was 0.56% higher.

Hong Kong’s Hang Seng (.HSI) rallied 0.6%, although mainland blue chips <.CSI300) were flat in early trading.

MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) added 0.29%, putting it on track for a 1.55% advance for the first week of 2023, its best weekly performance in a month.

U.S. E-mini stock futures ticked up 0.35%, pointing to a small bounce after the 1.16% overnight slide for the S&P 500 (.SPX).

Wall Street sold off amid worries that a robustness in the jobs market would keep the Fed raising rates for longer, after data released on Thursday showed a bigger than expected rise in private payrolls and a drop in jobless claims.

“There is concern that the labor market isn’t showing any signs of cooling,” putting financial markets “very much on edge”, said Tony Sycamore, a market analyst at IG.

“But the important one is going to be tonight, and I don’t think the bogey man is going to be in the cupboard with tonight’s number.”

According to a Reuters survey of economists, non-farm payrolls are forecast to show on Friday that 200,000 jobs were created in December, easing from November’s 263,000 pace.

U.S. two-year Treasury yields spiked to a more than two-month high of 4.497% overnight but eased to 4.460% in Tokyo. The 10-year yield , which rose as high as 3.784% in New York, dropped to 3.726%.

The U.S. currency remained elevated versus major peers on Friday. The dollar index , which measures the greenback against six counterparts including the euro and yen, was trading little changed at 105.11 after jumping 0.91% overnight and touching 105.27 for the first time since Dec. 8.

The dollar index is up 1.57% this week, putting it on course to snap a streak of three losing weeks. It is shaping up for the best performance since late September.

The greenback added 0.27% to 133.755 yen , taking it back towards Thursday’s one-week high of 134.045.

The euro edged 0.09% higher to $1.05295, but remained close to the overnight low of $1.0515, a level last seen on Dec. 12.

Crude oil rose, extending gains from Thursday after data showed lower fuel inventories.

Brent crude futures were last 79 cents, or 1%, higher at $79.48 a barrel. U.S. West Texas Intermediate crude futures were up 80 cents, or 1.1%, at $74.47 a barrel.

Jan 4 (Reuters) – The S&P 500 finished higher on Wednesday but below its session peak after volatile trading following the release of minutes from the Federal Reserve’s last meeting, which showed officials laser-focused on controlling inflation even as they agreed to slow their interest rate hiking pace.

Officials at the Fed’s Dec. 13-14 policy meeting agreed the U.S. central bank should continue increasing the cost of credit to control the pace of price increases, but in a gradual way intended to limit the risks to economic growth.

Investors were poring over the Fed’s internal deliberations for clues about its future path. After the meeting, Fed Chair Jerome Powell had said more hikes were needed, and took a more hawkish tone than investors had expected back then.

While some money managers said the minutes included no surprises, the market appeared to have been holding onto hopes for some sign that the Fed was at least considering easing its policy tightening.

“The market is like a kid asking for ice cream. The parents say ‘no,’ but the market keeps asking because the parents have caved in the past,” said Burns McKinney, portfolio manager at NFJ Investment Group LLC in Dallas. “The market still thinks it’s going to get ice cream, just not as soon as they thought before.”

McKinney pointed to the minutes for evidence of Fed officials’ concern that an unwarranted easing of financial conditions would complicate their efforts to fight inflation.

The Dow Jones Industrial Average (.DJI) rose 133.4 points, or 0.4%, to 33,269.77; the S&P 500 (.SPX) gained 28.83 points, or 0.75%, to 3,852.97; and the Nasdaq Composite (.IXIC) added 71.78 points, or 0.69%, to 10,458.76.

The S&P’s rate-sensitive technology index (.SPLRCT) lost some ground after the minutes before finishing up 0.26%. Even the bank sector (.SPXBK), which benefits from higher rates, pared gains but still finished up 1.9%.

Energy (.SPNY) was the weakest of the S&P’s 11 major industry sectors, closing up 0.06%, while real estate (.SPLRCR) was the strongest, closed up 2.3%, followed by a 1.7% gain in materials (.SPLRCM).

Also on Wednesday, Minneapolis Fed President Neel Kashkari also stressed the need for continued rate hikes, setting out his own forecast that the policy rate should initially pause at 5.4%.

“The Fed minutes are a good reminder for investors to expect rates to remain high throughout all of 2023. Amid a persistently strong job market, it makes sense that fighting inflation remains the name of the game for the Fed,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office in New York.

“Bottom line is that, even though we flipped the calendar, the market headwinds from last year remain.”

Market participants now see a 68.8% chance of a 25 basis points rate hike from the Fed in February, but still see rates peaking just below 5% by June. .

Earlier in the day, data showed U.S. job openings in November indicating a tight labor market, giving the Fed cover to stick to its monetary tightening campaign for longer, while other data showed manufacturing contracted further in December.

U.S. equities were pummeled in 2022 on worries of a recession due to aggressive monetary policy tightening, with the three main stock indexes logging their steepest annual losses since 2008.

On the Nasdaq 100 (.NDX) the largest gainer was U.S. shares of JD.Com Inc , which rose 14.7% on hopes for a post-COVID-19 recovery in China. The largest decliner was Microsoft , down 4.4% after a UBS analyst downgraded the stock to “neutral” from a “buy” rating.

Advancing issues outnumbered declining ones on the NYSE by a 4.30-to-1 ratio; on Nasdaq, a 2.74-to-1 ratio favored advancers.

The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite recorded 84 new highs and 51 new lows.

On U.S. exchanges 11.35 billion shares changed hands, compared with the 10.83 billion-share average for the last 20 trading days, which included some volume weakness due to the holidays.

Investing.com — U.S. stocks were off to a slow start in the new year, weighed by slumping tech giants as investors await this week’s minutes of the Federal Reserve’s last meeting.

At 16:04 ET (21:04 GMT), the Dow Jones Industrial Average was down 11 points or flat, while the S&P 500 was down 0.4% and the NASDAQ Composite was down 0.7%. All three indexes had recovered some of their losses during the day.

Apple shares (NASDAQ:AAPL) fell 3.7% and closed just below a $2 trillion market value for the first time since 2021. Meanwhile, shares of electric vehicle maker Tesla Inc (NASDAQ:TSLA) fell more than 12% on Tuesday, after falling 65% for 2022, after it reported lower-than-expected deliveries for the quarter and year.

Stocks ended 2022 with their worst showing since 2008 as interest rates rose throughout the year, pressuring once high-flying growth and big tech stocks.

The Fed has been on a campaign to stop inflation, embarking on the fastest pace of interest rate increases in decades, and it hasn’t finished yet. At December’s meeting, the central bank indicated rates would continue to rise until it was satisfied its mission to tame price increases was completed.

The S&P lost more than 19% last year, while the tech-heavy Nasdaq fell 33%.

Investors are eager to put the year in the rearview mirror and are hoping economic data this week can help push them forward. On Friday, the jobs report for December is due, and data on manufacturing is expected this week as the Fed minutes arrive. There will also be oil inventory data and job openings data for investors to absorb.

The market expects the Fed to raise its policy rate by a quarter of a percentage point when it next meets in February, which would be a slower pace than recent rate moves but still on an upward trajectory.

Casino stocks rose on the prospect of China’s Macau gambling mecca reopening after COVID-related shutdowns and restrictions. Wynn Resorts Limited (NASDAQ:WYNN) shares were up 3.8%, while Las Vegas Sands Corp (NYSE:LVS) shares were up 2.6%.

Exxon Mobil Corp (NYSE:XOM) stock fell 3.4% and Chevron Corp (NYSE:CVX) shares fell 3% after crude oil prices slumped around 4% on Tuesday.

Investing.com – U.S. stock futures were trading higher during Monday’s evening deals, with market participants looking ahead to a busy week of economic data and the release of the U.S. Federal Reserve’s latest meeting minutes.

By 6:356pm ET (11:35pm GMT) Dow Jones Futures and S&P 500 Futures were up 0.3% while Nasdaq 100 Futures added 0.2%.

Ahead in Tuesday’s session, investors will be looking towards the S&P Global (NYSE:SPGI) Manufacturing PMI and construction spending, JOLTS data as well as the minutes of the Fed’s latest policy meeting.

Later in the week, ADP nonfarm employment and December’s nonfarm payrolls report will also be closely watched.

On the earnings front, Walgreens Boots Alliance Inc (NASDAQ:WBA) and Constellation Brands Inc (NYSE:STZ) are set to report quarterly results on Thursday.

On the bond markets, United States 10-Year rates were at 3.831%.

Investing.com — The Dow snapped a four-day losing streak Tuesday, as rising energy stocks helped the broader market overcome an ongoing march higher in Treasury yields following the Bank of Japan’s unexpected hawkish pivot.

The Dow Jones Industrial Average gained 0.3%, or 92 points, the Nasdaq Composite was up 0.01%, and the  S&P 500 rose 0.1%.  

The Bank of Japan rattled investors overnight after announcing that it would allow 10-year Japanese government yields to rise as much as 50 basis points, or 0.5%. That was up from the previous 25 basis point cap, and signals the BoJ’s “first step toward tighter monetary policy by widening the target range for bond yield,” Commerzbank said in a note.

The surge in Japanese government bond yields pushed up yields on global bonds including Treasuries, keeping gains in rate-sensitive sectors like tech in check.

Rising energy stocks, however, helped steady the broader market higher as oil prices added to gains from a day earlier supported by a weaker dollar.

Halliburton Company (NYSE:HAL), Schlumberger NV (NYSE:SLB) and ConocoPhillips (NYSE:COP) were among the biggest sector gainers.

On the earnings front, meanwhile, General Mills (NYSE:GIS) lifted its guidance and delivered better-than-expected second-quarter results. Its stock, however, slipped more than 5%.

Consumer stocks were the biggest drag on the broader market with Tesla (NASDAQ:TSLA) leading to the downside after Evercore ISI cut its price target on EV maker to $200 from $300 on concerns of further downside as the stock failed to hold above a key level of support.

Retailers including VF Corporation (NYSE:VFC) and Ralph Lauren (NYSE:RL) were also under pressure as investors looked ahead to quarterly results from sportswear giant Nike (NYSE:NKE) – due after the closing bell – that could offer further clues on the strength of the consumer.  

Nike reported fiscal second-quarter results that topped estimates on both the top and bottom lines, sending its shares more than 6% higher in afterhours in trading.

In economic news, fresh housing data continued to show the pain from red-hot mortgage rates following the fast pace of Federal Reserve rate hikes this year.

Housing starts topped forecasts in November, but permits, a gauge of activity for future projects, fell to an 18-month low, fueling worries about further downside activity.

“With the November drop, permits are now below the level of starts, which is very rare and points to further downside for construction activity,” Jefferies said in a note.

By Ambar Warrick

Investing.com– Most Asian currencies moved little on Monday as fears of a potential recession and rising COVID-19 cases in China weighed on sentiment, while the Japanese yen gained on bets that the Bank of Japan (BoJ) could eventually tighten policy amid rising inflationary pressures.

The yen rose 0.4% to 136.18 against the dollar after a report suggested that the Japanese government plans to revise the BoJ’s inflation target to make it more flexible. Such a move heralds a potential policy shift in the central bank’s ultra-accommodative stance, which has seen Japanese interest rates stick to near-zero levels for nearly a decade.

This accommodative stance weighed heavily on the yen as interest rates in the rest of the world rose, which in turn fed into Japanese inflation, which is currently at a 40-year high. The Japanese economy was battered by rising inflation this year, while the yen is among the worst-performing Asian currencies in 2022.

Focus is now on the BoJ’s final meeting for the year on Tuesday. While the bank is widely expected to hold interest rates at ultra-low levels, any commentary on a possible shift in tone will be closely watched.

The South Korean won was the best performing Asian currency on Monday, surging 0.8% to 1,300.31 a dollar after Finance Minister Choo Kyung-ho said that the country’s economic slump will bottom out by mid-2023. While the east Asian country was hit hard by weakness in major trading partner China, the finance minister’s comments suggest that a 2023 recovery may be on the cards.

The won was also one of the best-performing Asian currencies in recent months, as it bounced back from a 13-year low hit in October.

Most other Asian currencies moved little against the dollar, with the greenback remaining steady after the Federal Reserve signaled last week that it intends to keep hiking interest rates in the near-term.

The dollar index fell 0.1%, coming under pressure from strength in the euro and the pound after hawkish signals from their respective central banks.

But the prospect of rising interest rates in the West weighed heavily on sentiment, as investors feared a potential recession due to inflation staying elevated.

Uncertainty over an economic reopening in China also weighed. While the country recently scaled back its strict zero-COVID policy, it is also coping with a sharp rise in infections, which markets fear could delay a full reopening.

The Chinese yuan fell 0.2% as recent economic data highlighted growing cracks in the country’s economy.

TOKYO : The safe-haven dollar held just below the month’s high against the yen on Friday and maintained overnight gains versus other peers amid growing worries that continued monetary tightening at the world’s biggest central banks could trigger a recession.

European Central Bank President Christine Lagarde said after the policy board raised interest rates again overnight that “this is not enough,” and that the bank must “continue the battle against inflation at a steady pace.”

A day earlier, the U.S. Federal Reserve also tightened policy, with Chair Jerome Powell adding policymakers expected rates to rise higher and stay elevated for longer.

“It has been a big night in markets, with the modestly ‘risk-off’ reaction to the Fed on Wednesday from what was seen as a slightly more hawkish than expected set of outcomes, greatly exacerbated by the messaging out of the ECB’s meeting,” Ray Attrill, head of foreign-exchange strategy at National Australia Bank, wrote in a note.

The dollar index, which gauges the currency against the euro, yen and four other peers, edged 0.06 per cent lower to 104.45 in early Asia trading, but following a 0.85 per cent surge overnight, its biggest since late September.

It has been a volatile week for the greenback though, which has it ultimately on track for a 0.47 per cent decline.

The dollar climbed as high as 138.18 yen on Thursday for the first time since Nov. 30, ending that day with a 1.68 per cent gain. On Friday, it eased back 0.18 per cent to 137.51 yen.

The euro added 0.08 per cent to $1.0637, rebounding slightly from Thursday’s 0.49 per cent retreat.

Sterling, which is also part of the dollar index, gained 0.11 per cent to $1.21945, following a 1.99 per cent tumble the previous day.

The Bank of England raised its key interest rate on Thursday as well and indicated more hikes were likely. However, investors bet that the BoE might be getting close to the end of its increases in borrowing costs.

The risk-sensitive antipodean currencies stabilised on Friday following big drops the previous day.

The Australian dollar was 0.13 per cent higher at $0.67085, recovering after a 2.38 per cent slide overnight that saw it touch $0.6677 for the first time since Dec. 7.The New Zealand dollar bounced 0.19 per cent to $0.6353 following a 1.84 per cent tumble on Thursday, when it dipped to $0.6321, also a first since Dec. 7.

WASHINGTON: The Federal Reserve will deliver more interest rate hikes next year even as the economy slips towards a possible recession, Fed Chair Jerome Powell said on Wednesday, arguing that a higher cost would be paid if the US central bank does not get a firmer grip on inflation.

Recent signs of slowing inflation have not brought any confidence yet that the fight has been won, Powell told reporters after the Fed’s policy-setting committee raised its benchmark overnight interest rate by half a percentage point and projected it would continue rising to above 5% in 2023, a level not seen since a steep economic downturn in 2007.

Those rises in borrowing costs would come despite an economy that Fed officials projected will operate at near stall speed through next year, with an annual growth rate of 0.5% and an unemployment rate nearly a full percentage point higher by the end of 2023, well beyond the increase historically associated with a recession.

“We don’t talk about this kind of recession, that kind of a recession. We just make these forecasts,” Powell said in a news conference. “I wish there were a completely painless way to restore price stability. There isn’t, and this is the best we can do.”

He described the slow rate of economic growth penciled in by Fed officials next year as still “modest.”

“I don’t think it would qualify as a recession … That’s positive growth,” the Fed chief said, even though “it is not going to feel like a boom.”

But other aspects of the Fed’s projections, notably a rise in the unemployment rate to 4.6% from the current 3.7%, are consistent with a downturn settling in as the central bank keeps its target policy rate at a “restrictive level” for at least the next two years.

The rate increase on Wednesday, which was approved unanimously by Fed policymakers and widely expected by financial markets, lifted the targeted policy rate to the 4.25%-4.50% range, with officials expecting it to rise to a level between 5.00% and 5.25% next year.

If anything, the bias is higher: seven of 19 policymakers projected even higher rates will be needed, and U.S. central bankers are unanimous that the risks are tilted towards higher-than-expected inflation rather than a surprise in the other direction.

Still, Powell said, repeating the hard-line on enforcing the Fed’s 2% inflation target that he has developed through the year, “the largest amount of pain, the worst pain, would come from a failure to raise rates high enough and from us allowing inflation to become entrenched.”

“The new economic projections imply an even higher pain threshold than before” for a Fed willing to tolerate the equivalent of about 1.6 million lost jobs, wrote Aneta Markowska, chief financial economist at Jefferies. “This suggests hawks still outnumber the doves by a significant margin.”

Even with recent improvements, the Fed’s preferred measure of inflation remains around triple the central bank’s target, and policymakers project it will take at least three years to fall all the way back.

Only two of 19 Fed officials see the benchmark overnight interest rate staying below 5% next year, a sign of a still broad consensus to lean against inflation.

The message from the Fed on Wednesday also leaned against market expectations that recent data showing slowing inflation might push the central bank from its hawkish path and move policymakers toward cutting rates before the end of next year.

“Getting markets to hear that is key to fixing financial conditions” that have loosened in recent months as inflation data has improved, a move counter-productive to the Fed’s inflation-fighting strategy, said Carl Riccadonna, chief US economist at BNP Paribas.

‘ESTRICTIVE ENOUGH’

The new statement was released after a policy meeting at which officials scaled back from the three-quarters-of-a-percentage-point rate increases delivered at the last four gatherings.

US stocks closed lower on Wednesday. In the US Treasury market, which plays a key role in the transmission of Fed policy decisions into the real economy, yields were little changed to slightly lower. The dollar dipped against a basket of currencies.

“Taken together, today’s statement and economic projections tell a simple, but persuasive story: this Fed isn’t prepared to ‘pivot’ in any meaningful way until it sees sustained and conclusive evidence of a reversal in inflationary pressures,” said Karl Schamotta, chief market strategist at Corpay.

Powell said the speed of coming rate rises is less critical now than earlier in the year when the central bank was “front-loading” rate hikes to catch up with accelerating prices.

“It’s not as important how fast we go,” he said, noting the bigger question facing policymakers is finding an “appropriately restrictive” endpoint and determining how long to stay there.

“Our focus right now is really on moving our policy stance to one that is restrictive enough to ensure a return of inflation to our 2% goal over time, it’s not on rate cuts,” Powell said.

“The inflation data received so far in October and November show a welcome reduction in the pace of price increases, but it will take substantially more evidence to give confidence inflation is on a sustained downward path,” Powell said. — Reuters

NEW YORK, Dec 14 ― US stocks rose yesterday after a unexpectedly small consumer price increase buoyed optimism that the Federal Reserve could soon dial back its inflation-taming interest rate hikes, but concerns remained the central back could stay aggressive.

The benchmark S&P 500 jumped as much as 2.76 per cent to a three-month high early in the trading session on news that November US consumer prices barely rose as gasoline and used cars cost less, leading to the smallest annual inflation increase in nearly a year at 7.1 per cent.

Rising expectations for smaller and slower Fed rate hikes sent US Treasury yields sharply lower and helped lift rate-sensitive gauges like the S&P 500 growth index, up 1.18 per cent, and the S&P 500 real estate index up 2.04 per cent to their highest intraday levels in nearly three months. The real estate sector notched its biggest daily percentage gain in two weeks as the best performing of the 11 major sectors.

Fed funds futures prices implied a better-than-even chance that the Fed will follow an expected half-point rate hike this week, with smaller 25-basis point hikes at its first two meetings of 2023, and stopping shy of 5 per cent by March.

Morgan Stanley’s chief US economist Ellen Zentner now sees even smaller Fed rate hikes, of 25 basis points at the central bank’s February meeting, and no further increases in March, leaving the peak fed funds rate at 4.625 per cent.

Still, equities pared gains ahead of the Fed’s policy statement today, in which the central bank is widely expected to announce a 50 basis point rate hike.

“There was some excitement early on that the CPI number was once again below expectations ― it shows some sequential cooling ― but once we saw that initial pop, stock investors kind of reassessed,” said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, Utah.

“That probably took some of the steam out of the markets once investors realised tomorrow very well may be (Fed Chair) Jerome Powell throwing cold water on the rally today.”

The Dow Jones Industrial Average rose 103.6 points, or 0.3 per cent, to 34,108.64, the S&P 500 gained 29.09 points, or 0.73 per cent, to 4,019.65 and the Nasdaq Composite added 113.08 points, or 1.01 per cent, to 11,256.81.

Energy, up 1.77 per cent, was among the best performing S&P sectors on the day as the softer-than-anticipated inflation data sent the dollar lower and boosted crude oil prices.

The consumer inflation numbers follow November’s producer prices report last week, which was slightly higher than expected but pointed to a moderation in the trend.

Still, some questioned whether the trend in prices could continue.

“Today’s CPI print is incrementally good, but it needs to be sustained,” said Venu Krishna, head of US equity strategy at Barclays in New York.

“There is a big question mark whether we can really come to the 2 per cent inflation (Fed target). Perhaps we live in a world in which it will be higher and that means rates will be higher and then multiples will certainly be lower.”

Moderna Inc surged 19.63 per cent after the biotechnology firm’s experimental vaccine in combination with Merck & Co Inc’s blockbuster drug Keytruda showed promising results in a skin cancer study. Merck shares advanced 1.78 per cent.

Pinterest Inc PINS.N jumped 11.90 per cent after Piper Sandler upgraded the social media platform’s stock to “overweight” from “neutral.”

Advancing issues outnumbered declining ones on the NYSE by a 2.83-to-1 ratio; on Nasdaq, a 1.49-to-1 ratio favoured advancers.

The S&P 500 posted 18 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 92 new highs and 212 new lows. ― Reuters

By David French

(Reuters) – Wall Street ended lower on Tuesday, with the S&P 500 extending its losing streak to four sessions, as skittish investors fretted over Federal Reserve rate hikes and further talk of a looming recession.

Meta Platforms Inc (NASDAQ:META) dragged down markets, with its shares sliding 6.8% following reports that European Union regulators have ruled the company should not require users to agree to personalized ads based on their digital activity.

However, technology names generally suffered as investors applied caution toward high-growth companies whose performance would be sluggish in a challenging economy. Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) Inc fell between 2.5% and 3%, while the tech-heavy Nasdaq was pulled lower for a third straight session.

Most of the 11 major S&P sectors declined, with energy and communications services joining technology as leading laggards. Utilities, a defensive sector often preferred during times of economic uncertainty, was the only exception, gaining 0.7%.

Future economic growth prospects were in focus on Tuesday following comments from financial titans pointing toward uncertain times ahead.

Bank of America Corp (NYSE:BAC)’s chief executive predicted three quarters of mild negative growth next year, while JPMorgan Chase (NYSE:JPM) and Co’s CEO Jamie Dimon said inflation will erode consumer spending power and that a mild to more pronounced recession was likely ahead.

Their comments came on the heels of recent views from BlackRock (NYSE:BLK) and others that believe the U.S. Federal Reserve’s aggressive monetary tightening to combat stubbornly high price rises could induce an economic downturn in 2023.

“The market is very reactive right now,” said David Sadkin, president at Bel Air Investment Advisors.

He noted that, while markets traditionally reflect the future, right now they are moving up and down based on the latest headlines.

Fears about economic growth come amid a re-evaluation by traders of what path future interest rate hikes will take, following strong data on jobs and the services sector in recent days.

Money market bets are pointing to a 91% chance that the U.S. central bank might raise rates by 50 basis points at its Dec. 13-14 policy meeting, with rates expected to peak at 4.98% in May 2023, up from 4.92% estimated on Monday before service-sector data was released.

The S&P 500 rallied 13.8% in October and November on hopes of smaller rate hikes and better-than-expected earnings, although such Fed expectations could be undermined by further data releases, including producer prices due out on Friday.

“The market got ahead of itself at the end of November, but then we got some good economic data, so people are re-evaluating what the Fed is going to do next week,” said Bel Air’s Sadkin.

The Dow Jones Industrial Average fell 350.76 points, or 1.03%, to close at 33,596.34, the S&P 500 lost 57.58 points, or 1.44%, to finish at 3,941.26 and the Nasdaq Composite dropped 225.05 points, or 2%, to end on 11,014.89.

Jitters on the direction of global growth have also weighed on oil prices, with U.S. crude slipping to levels last seen in January, before Russia’s invasion of Ukraine disrupted supply markets. The energy sector fell 2.7% on Tuesday.

Banks are among the most sensitive stocks to an economic downturn, as they potentially face negative effects from bad loans or slowing loan growth. The S&P banks index slipped 1.4% to its lowest close since Oct. 21.

Volume on U.S. exchanges was 11.01 billion shares, in line with the average for the full session over the last 20 trading days.

The S&P 500 posted three new 52-week highs and nine new lows; the Nasdaq Composite recorded 52 new highs and 262 new lows.