Market Snapshot: Dow, S&P 500 fall for a fifth straight day, U.S. stocks close mostly lower as Fed policy decision looms

Related: What investors need to know about the S&P 500 bear market

What’s driving markets

The Federal Reserve’s two-day interest rate-setting meeting kicks off Tuesday, with huge question marks around how the central bank will respond to the fastest inflation in four decades. There’s now growing talk the Fed will hike by least 75 basis points, a move that seemed remote even last week. How the Fed will convey its intentions about future rate activity is also a big question.

“In my view a surprise 75 bps (basis points) hike would be a happy one,” said Nancy Tengler, chief executive and chief investment officer of of Laffer Tengler Investments.

“The question now is whether the economy can avoid recession. We expected a slowing economy in 2022 and have made adjustments to strategies and overall allocations accordingly. And have been in the camp for a short and shallow recession in 2023, if at all,” she said, in emailed comments.

Mark Haefele, chief investment officer for UBS global wealth management, said risks of a Fed-induced recession have increased, and the chances of a recession in the next six months have risen.

“Wednesday’s FOMC meeting, which includes the Fed’s latest economic forecasts, is one of the most significant in recent history and will be critical for the outlook for financial markets. Volatility is likely to remain high over the coming days, as investors consider the potential need to recalibrate their assumptions based on the Fed’s decisions,” he said.

The cost of wholesale goods and services jumped 0.8% in May and added to mounting evidence that the highest U.S. inflation in 40 years will persist through the summer. Economists polled by The Wall Street Journal had forecast a 0.8% rise in the producer price index.

The NFIB Small Business Optimism Index decreased marginally to 93.1 in May from 93.2 in April, the lowest level since April 2020, according to data released Tuesday by the National Federation of Independent Business. The reading was broadly in line with economists’ expectations in a poll by The Wall Street Journal.

Companies in focus

Shares of database giant Oracle Corp.
ORCL,
+9.57%
rose 8.4% after beating earnings and revenue estimates for its fiscal fourth quarter, though its first-quarter earnings guidance was below Wall Street estimates.

Crypto exchange Coinbase Global Inc.
COIN,
+1.33%
announced it would lay off 18% of its employees less than two weeks after the company said it would extend a hiring freeze and rescind some offers. Shares fell 4.6%.

FedEx Corp.
FDX,
+14.62%
said it would lift its quarterly cash dividend by 53% to $1.15 a share from 75 cents previously. Shares jumped nearly 13%.

Other assets

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.455%
rose 3 basis points to 3.398%, after rising Monday to its highest in 11 years. Yields and debt prices move opposite each other.

The ICE U.S. Dollar Index
DXY,
+0.16%,
a measure of the currency against a basket of six major rivals, was up 0.3%.

Bitcoin
BTCUSD,
-2.66%
bounced 0.5% to $22,557 as selling relented. The digital asset has dropped nearly 30% so far in June.

The Stoxx Europe 600
SXXP,
-1.26%
was down 1%, while London’s FTSE 100
UKX,
-0.25%
was flat.

The Shanghai Composite
SHCOMP,
+1.02%
rose 1%, while the Hang Seng Index
HSI,
+0.00%
ended virtually unchanged in Hong Kong and Japan’s Nikkei 225
NIK,
-1.32%
fell 2.5%.