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S&P 500 Shrugs off Hawkish Fed Bets to Turn Positive

Published 2022-10-11, 02:54 p/m
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By Yasin Ebrahim

Investing.com -- The S&P 500 cut losses Tuesday, after Treasury yields eased from session highs despite Federal Reserve commentary flagging the need to keep tightening monetary policy as the mission to bring down inflation still has room to go.  

The S&P 500 rose 0.39%, the Dow Jones Industrial Average gained 1.2%, or 342 points, and the Nasdaq was down 0.1%.

Federal Reserve Bank of Cleveland President Loretta Mester echoed remarks from other voting Fed members, calling on the need for monetary policy to become “more restrictive” to “put inflation on a sustainable downward path to 2%.”

The remarks come just days ahead of Thursday's inflation report that is expected to all but confirm that the Fed will hike interest rates by 75 basis points for the fourth time in a row.

In anticipation of another large rate hike, Treasury yields climbed, with the 10-year Treasury rising to 4% before running out of steam allowing beaten down tech stocks to move off the lows of the day.

Meta Platforms (NASDAQ:META), meanwhile, moved off 52-week lows but was down more than 3% after Atlantic Equities downgraded the social media giant to underweight from neutral, citing a challenging macroeconomic environment.  

Semiconductor stocks added to their losses from a day earlier as sentiment remained bearish on the sector in the wake of the U.S. export ban on the sale of chips and other semiconductor equipment to China.

Despite the dip-buying seen in tech, some experts remain wary of rotating back into growth stocks on expectations that the trend of rising Treasury yields, the enemy of growth stocks, could continue.

“When rates come down, then value underperforms growth…that is what really drove that June through August rally in growth,” David Keller at StockCharts.com told Investing.com's Yasin Ebrahim in an interview on Tuesday. But “those trends have now all reversed,” according to Keller.

“Starting in early August, rates bottomed out and then rotated higher, hitting 4% on the 10-year Treasury yield...and in the last two months, value stocks have once again emerged,” he added.

Consumer staples, a defensive corner of the market, also played role in the turnaround, led by a 3% rally in Walgreens Boots Alliance Inc (NASDAQ:WBA) after the e drugstore chain said it had acquired healthcare firm CareCentrix. The announcement comes ahead of the company’s quarterly results due Thursday.

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