Stock markets closed lower for a third straight session on Tuesday, as traders braced for today's Federal Reserve decision against a backdrop of rising bond yields and climbing oil prices.
The Dow Jones Industrial Average fell more than 300 points, or about 0.6 percent, to close near 52,099, with losses led by Nike, Alphabet, and Amazon. The S&P 500 slipped 0.4 percent and the Nasdaq Composite lost 0.6 percent, according to data tracked by Trading Economics. Nearly 350 companies in the S&P 500 retreated during the session, Bloomberg reported, as benchmark 10 year Treasury yields climbed to their highest level in years. A weak 13 billion dollar sale of 20 year government bonds added to the pressure on longer dated debt.
Much of the caution traces back to energy markets. Oil prices have been rising for weeks amid tensions in the Middle East, and higher fuel costs have become a growing worry for a Fed that had otherwise been seeing inflation cool. That dynamic has left traders reluctant to take on risk heading into the Fed's policy announcement.
Technology and AI related shares were part of the pullback. Shares of SpaceX, which went public in June at 135 dollars a share and briefly touched a record of 225.64 dollars, fell to around 148 dollars amid a broader slide in AI linked stocks tied to the expiration of post IPO insider lockups. Hedge fund manager David Einhorn had separately warned in a recent investor letter that SpaceX's roughly 1.75 trillion dollar valuation could be a sign that speculative excess in markets is near a peak. Cryptocurrencies also sold off, with Bitcoin falling roughly 2.9 percent to around 76,800 dollars and Ether down about 2.7 percent, while shares of Coinbase dropped nearly 5 percent.
Today's Fed decision and the accompanying economic projections are likely to set the tone for markets through the rest of the week, especially for rate sensitive sectors like housing and technology.
Why are stocks falling ahead of the Fed meeting?
Investors are cautious about higher bond yields and rising oil prices, and many are waiting to see the Fed's rate decision and updated projections before making new bets.
What is driving the pullback in AI-linked stocks like SpaceX?
A mix of profit taking after big post-IPO gains, the expiration of insider share lockups, and broader concern voiced by some investors that AI valuations have climbed too far too fast.