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Dow tumbles 400 points as selling increases before key Fed rate decision

Expect a hawkish Fed ahead, Oxford Economics’ Bostjancic says

Oxford Economics’ Kathy Bostjancic anticipates further hawkishness ahead from the Federal Reserve and Chairman Jerome Powell.

Investors on Wednesday will be closely watching rhetoric from Powell when he speaks Wednesday following the central bank’s next rate hike decision.

“I think they have to continue to sound hawkish because they’re far from their inflation goal and demand and the labor market are still running too hot relative to supply,” she said.

Current market conditions and August’s hotter-than-expected CPI report, further underscore the central bank’s need to remain aggressive in its fight to tame surging prices, she added.

While Powell is unexpected to explicitly lay out the next rate decision, Bostjancic expects the chairman to leave the door open to another potential sizeable hike come November.

— Samantha Subin

GMO’s latest 7-year asset return forecasts show smaller projected losses for U.S. stocks

Grantham Mayo van Otterloo, the Boston-based money manager co-founded by noted investor Jeremy Grantham in 1977, is out with its latest monthly forecast for stock and bond returns over the next seven years, and it again favors emerging market stocks over U.S. equities, and emerging market debt over other bond markets.

U.S. large cap stocks are forecast to lose 1.1% a year, down from an estimate of -2.2% a year previously. U.S. smallcaps are now projected to lose 1.0% a year, down from an estimate -1.9%.

Emerging market value stocks are forecast to return 8.7% annually, up from 8.5% last month, the best among the six classes of stocks measured. Emerging market stocks overall are estimated to return 4.8% a year, little changed, international smallcap stocks 4.2%, up from 3.2% and international large stocks 2.6% vs 1.6%.

The only positive return GMO projects in fixed income is emerging market debt, at 3.0% a year, up from 2.7% annually over the next seven years in the last projection. U.S. inflation-linked bonds are forecast to return -0.7% a year, down from – 1.8% last time; U.S. bonds -.3% vs -2.4%; and international bonds (hedged for currency) at -2.6% against -3.4% per annum previously.

The returns are projected in after-inflation real terms, in local currency and assume a return on U.S. cash holdings of plus 0.2% a year. U.S. cash returns were pegged at -0.4% per year in the last forecast. GMO assumes U.S. inflation will “mean revert to long-term inflation of 2.2% [annually] over 15 years.” GMO pegs the long-term historical U.S. equity return at 6.5%.

GMO managed almost $72 billion as of the end of the first quarter 2022.

— Scott Schnipper

These stocks are making the biggest moves midday

As the major averages slump, some individual stocks are making outsized moves both up and down.

One of the biggest gainers of the day is Change Healthcare, which has surged more than 6% Tuesday after a federal judge said that UnitedHealth cannot take over the company.

Shares of vaccine makers BioNTech, Moderna and Novavax rebounded, gaining Tuesday after falling Monday when President Joe Biden made a comment that the pandemic was over.

Shares of health company Humana gained 1% Tuesday and touched a 52-week high a day after the company raised its earnings guidance for the fiscal year. The company was also upgraded by Morgan Stanley, who said it could be the top retail drug plan for Medicare Advantage.

Click here to read more.

—Carmen Reinicke

Real estate stocks among S&P 500’s worst performers

Yields on the 10-year, 2-year Treasury hit fresh highs

Rates climbed on Tuesday with the yield on the 10-year and 2-year Treasury notes notching multi-year highs as markets braced for another large rate hike from the Federal Reserve on Wednesday.

The yield on the 2-year Treasury hit a fresh 15-year high of 3.983%, while the yield on the 10-year note jumped to 3.593% — levels not seen since April 2011.

— Samantha Subin

Stocks set up for ‘face-ripping rally,’ Josh Brown says

Josh Brown of Ritholtz Wealth Management said on “Halftime Report” that stocks are poised for a short-term rally around the Federal Reserve meeting even though the bear market trends are still intact.

Brown pointed to calm volatility measures despite spiking Treasury yields, as well as the number of stocks in technical uptrends or at 52-week lows, as reasons to believe the market is approaching a near-term bounce.

“Today looks nothing like mid-June. … The fear, the volatility is just not there. Nothing like the last time we were at these levels, which leads me to believe, as hawkish as we think the Fed will be — and they should, that’s their job right now — I just don’t think the market has enough fear in it. And I just don’t think we’re going to have the same kind of reaction we got last time,” Brown said.

— Jesse Pound

Expect ‘nasty’ down days heading into October, Bank of America’s Suttmeier says

Expect some “nasty down days” ahead stretching into late September and the start of October, Bank of America’s Stephen Suttmeier says.

“Average returns for each day of the month show plenty of negative (red) days for late September,” Suttmeier wrote in a note to clients Tuesday. “October has its share of big down days, but these down days often provide an opportunity for dip buyers ahead of better seasonality from November through January.”

While October experiences its fair share of down days, those moves lower create opportunities for dip buyers, Suttmeier said.

Bearish seasonal trends can also explain last week’s stock sell-off, with the historical bearish period commencing on Monday, he added.

“Going back to 1928, the S&P 500 is up only 40% of the time on an average return of -1.04% (-0.59% median) over this period,” he wrote.

— Samantha Subin

Apple leads tech off the lows

Apple shares turned around to trade more than 1% higher on the day, lifting the broader tech sector off its session lows. As of 11:31 a.m. ET, tech was only off by 0.3% after falling as much as 1.2% earlier in the day.

Recession fears will rise the longer inflation stays elevated, Goldman’s Wilson says

Rising fears of a looming recession are already contributing to the ongoing volatility in equity markets and investors should brace for more potential turmoil ahead, Goldman Sachs’ Dominic Wilson said.

“Heightened fear of recession risk has helped to keep US policy rate pricing inverted from early 2023 to early 2026 and may help to explain why equity volatility is higher than the macro landscape would generally predict,” wrote Wilson in a note to clients Tuesday. “Even so, markets will need to adjust significantly further if the more hawkish view of the labor market is right.”

Wilson said the S&P 500 needs to trade within the 2,900 to 3,375 range and 5-year yields between 4.5-5.4% if the Fed needs to see higher unemployment to gain confidence that inflation will fall.

These recessionary fears will continue to rise the longer inflation stays elevated, which in turn would force the central bank to more expeditiously fight inflation.

— Samantha Subin

Just 2 stocks make new 52-week highs on Tuesday

Tuesday’s downbeat session saw just two S&P 500 stocks reach new highs: Humana and Constellation Energy. The former hit an all-time high dating back to 1968, when it was called Extendicare. Constellation Energy is back to record levels going back to its spin-off from Exelon earlier this year.

A slew of companies hit 52-week lows, however, including Match Group — which reached an all-time low. Here are some:

— Chris Hayes, Fred Imbert

Broad bond ETFs struggling as yields surge

The spike in yields could be good news for investors looking to park some cash right now and earn income, but it’s causing a headache for those who already owned bonds.

Strategas technical and ETF strategist Todd Sohn highlighted in a note to clients that broad bond funds have taken a big hit over the last six weeks, including the iShares Core U.S. Aggregate Bond ETF, which has now fallen more than 14% year to date.

“With 3Q concluding in a few weeks, there’s likely to be a fair amount of noise at the flows level with rebalancing in force. On that note, we’d argue two of the more important charts for investors and their clients to know are the record drawdowns occurring for Aggregate Bond ETFs (e.g. AGG, BND, IUSB) as well as the -26% drawdown for the $1.2 Bn Risk Parity ETF (RPAR),” Sohn wrote. “Both speak to the challenging market environment across asset classes with bonds recently failing their own version of a ‘re-test’ at their June lows.”

Travel stocks rise

All S&P 500 sectors slid into negative territory during early morning trading, but some travel stocks remained a bright spot.

Shares of Norwegian Cruise Line and Carnival added about 1% each, while Airbnb and Wynn Resorts jumped about 1% and 6%, respectively.

Airline stocks were mixed with shares of United up 1% and Delta and American Airlines trading marginally higher. Shares of Southwest and JetBlue dipped into negative territory.

— Samantha Subin

Only 16 stocks in the S&P 500 are in positive territory

The sell-off on Wall Street was broad based with just 16 stocks in positive territory on Tuesday morning.

Casino stocks Wynn Resorts and Las Vegas Sands were the leading outperformers, up 5.7% and 5.4%, respectively. Travel stocks Norwegian Cruise Line Holdings and United Airlines gained 2.5% and 1.4% each.

— Sarah Min

Fed expected to hold rates higher, CNBC survey finds

Investors are coming to grips with the idea that the Federal Reserve will lift rates considerably higher and leave them there until inflation comes down, according to the latest CNBC Fed Survey.

The survey of 35 fund managers, strategists and economists found that expectations are for the central bank to keep raising rates into early 2023, with the final, or terminal, rate around 4.26%. That compares to the current target range of 2.25%-2.5%.

Moreover, respondents indicated they expect the Fed to hold that rate for 11 months. That contrasts with previous forecasts that the higher rate would prevail for only a few months before the first cut happens.

The Fed is widely expected to raise its benchmark funds rate by 0.75 percentage point when it announces its decision Wednesday.

—Jeff Cox

21 SPACs have liquidated in 2022

In all, 21 special purpose acquisition companies have liquidated this year as investors step back from riskier investments, according to data from SPAC Research. That’s up from just one liquidation in 2021.

So-called SPACs raise capital in an initial public offering and use the proceeds to snap up a private company and take it public, typically within a two-year period.

Notable liquidations this year include Bill Ackman’s $4 billion SPAC Pershing Tontine. Chamath Palihapitiya is also shutting down two SPACs after failing to find firms to bring to the public markets, according to a report from The Wall Street Journal. OpenDoor, one of Palihapitiya’s SPAC mergers, is down nearly 75% year to date.

CNBC’s Post SPAC index, comprised of the largest companies that have debut via SPACs in the last two years, is off by more than 52% year to date.

Darla Mercado, Gina Francolla

Ford tumbles 9% after supply chain warning

Shares of Ford fell 9% in early trading after the automaker said on Tuesday evening that supply chain issues would cost the company $1 billion in the third quarter.

Supply problems have plagued automakers since the start of the pandemic in 2020, as rolling shutdowns in China have presented a series of challenges. At the same time, Ford and other automakers have pledge to spend billions on the transition to electric vehicles, pressuring their bottom lines in the near term.

Other auto stocks were also under pressure, with Stellantis falling 2.6% and General Motors sliding more than 3%.

— Jesse Pound

Stock open lower as the Fed’s September meeting begins

Stocks opened lower on Tuesday. The Dow Jones Industrial Average fell 252 points, or 0.82%. The S&P 500 shed 0.85% and the Nasdaq Composite slid 0.67%.

All S&P 500 sectors also dipped into negative territory, led to the downside by materials and industrials.

— Samantha Subin

Permits tell the real housing story, and it’s not a good one, economists says

A much higher than expected jump in housing starts for August masks underlying weakness in the real estate market, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Housing starts soared 12% higher from the previous month, far greater than the 0.3% Dow Jones estimate. However, building permits plunged 10%, much worse than the expectation for a 4.4% drop.

Shepherdson said the permits number tells the real story of a housing market mired in a deep slump.

“As a general rule, when starts and permits move in opposite directions, trust the permits numbers, which lead and usually are less noisy,” he said. “In short, ignore the headline starts numbers. The collapse in single-family permits is the real story, and it has much further to go.”

The industry has come under pressure as the Federal Reserve has been raising interest rates, driving the 30-year mortgage rate above 6%. The Fed is expected to raise rates another 0.75 percentage point when it releases its decision Wednesday.

—Jeff Cox

U.S. dollar hits fresh high ahead of Fed meeting

The U.S. dollar index, which tracks the currency against a basket of others, hit a fresh high of 110.181 Tuesday as investors brace for the Federal Reserve’s September meeting, where the group is expected to deliver another aggressive rate hike.

It’s the highest the index has been since Sept. 16 when it hit a high of 110.26. The dollar also hit a record high of 10.8979 against the Swedish krona, notching the highest level against the currency in more than two decades.

The dollar also gained against the Euro. The Euro slipped to 0.9959 against the dollar.

—Carmen Reinicke, Gina Francolla

August read on housing starts comes in stronger than expected

U.S. homebuilding increased in August, a surprise to the upside as rising rents boosted construction of multi-family housing units.

Housing starts rebounded 12.2% to a seasonally adjusted annual rate of 1.575 million units last month, the Commerce Department said on Tuesday. That marked the biggest gain since March 2021, when starts gained 19.65%. Economists polled by Dow Jones had forecast housing starts to increase 0.3% to 1.45 million.

Meanwhile, building permits decreased 10% in August to a seasonally adjusted annual rate of 1.517 million, compared to expectations of a 4.4% decline.

— Tanaya Macheel

Stocks making the biggest moves in the premarket: Ford, Change Healthcare, Norwegian Cruise Line and more

These are some of the stocks making the biggest moves in premarket trading.

Ford – The automaker’s stock fell 4.5% in the premarket after it warned that quarterly earnings would take a hit of about $1 billion from increased supplier costs and parts shortages.

Norwegian Cruise Line – Norwegian jumped 3% in the premarket after Truist Financial upgraded the stock to “buy” from “hold,” pointing to a decrease in cancellations and subsequent rebookings at lower prices.

Change Healthcare – The health care technology firm’s stock rallied 7.5% in premarket action after a federal judge ruled against the Justice Department’s antitrust challenge to UnitedHealth’s (UNH) planned $13 billion acquisition of the company.

Check out the other stocks moving in the premarket here.

— Peter Schacknow, Samantha Subin

2-year Treasury yield hits fresh 15-year high

The yield on the 2-year U.S. Treasury note notched a fresh 15-year high on Tuesday as traders looked ahead to a decision out of the Federal Reserve’s rate-hike meeting.

The yield on the policy-sensitive 2-year Treasury gained about 3 basis points, reaching 3.977% — a level it had not hit since late 2007.

Yields move inversely to prices, with one basis point equal to 0.01%.

— Samantha Subin

Barclays downgrades Nike ahead of earnings report

Ongoing inventory and demands issues make now a good time to steer clear of Nike heading into the company’s earnings release next week, Barclays says.

“We downgrade shares of NKE to Equal Weight based on: 1) our bearish Wholesale sector demand risk thesis, 2) continued volatility in the Greater China (“China”) market, 3) excess NA inventory creating heightened operating risk, 4) potential demand erosion in both NA and EMEA, and 5) FX headwinds, primarily in Europe,” analyst Adrienne Yih wrote in a note to clients.

Shares of Nike fell more than 2% in premarket trading.

CNBC Pro subscribers can read the full downgrade here.

— Sarah Min

Western Digital gets downgraded at Deutsche Bank

Deutsche Bank analyst Sidney Ho downgraded Western Digital shares to hold from buy, citing weakening demand for the data storage company.

“We believe WDC’s F1Q (Sep) revenue and EPS are tracking below the low end of guidance, and F2Q (Dec) outlook are also likely to be meaningfully below current Street estimates,” Ho wrote in a Monday note.

Western Digital shares dipped more than 1% after the downgrade.

CNBC Pro subscribers can read more here.

— Sarah Min

German producer prices soar 45.8% year-on-year in August

German producer price inflation hit 45.8% year-on-year in August, the federal statistics office said on Tuesday, driven by soaring energy prices.

The reading vastly outstripped a Dow Jones consensus forecast of 37.9%, while on a monthly basis, the producer price index rose 7.9% against a forecast of 1.6%.

The PPI reading excluding energy, however, was 0.4% on the month and 13% on the year.

– Elliot Smith

Sweden’s central bank launches 100 basis point rate hike, says ‘inflation is too high’

Sweden’s Riksbank on Tuesday launched a 100 basis point hike to interest rates, taking its main policy rate to 1.75%, as it warned that “inflation is too high.”

In a statement, the central bank said soaring inflation was “undermining households’ purchasing power and making it more difficult for both companies and households to plan their finances.”

Read more here.

– Elliot Smith

European markets choppy as Fed meeting gets underway

European markets were choppy on Tuesday, struggling to build on the previous session’s broadly higher trade.

The pan-European Stoxx 600 fell 0.7% by late morning, having given back opening gains of more than 0.9%. Basic resources fell 1.9% to lead losses while autos bucked the downward trend to add 0.6%.

CNBC Pro: Fund manager says the bear market is going to get ‘nasty’

Fund manager Cole Smead believes the stock market is still in the early innings of a bear market — and warns that it won’t be a “garden variety” one.

But, he is not losing any sleep over it. Here’s why:

Pro subscribers can read more here.

— Zavier Ong

China keeps key lending rates unchanged

The People’s Bank of China kept its one-year and five-year loan prime rates (LPR) unchanged, in line with predictions in a Reuters poll.

The one-year loan prime rate remains at 3.65%, and the five-year rate closely tied to home mortgages stands at 4.3%. China cut both those rates last month.

— Abigail Ng

Ford under pressure after supply chain warning

Shares of Ford fell more than 4% in extended trading after the automaker warned it would take a $1 billion hit due to supply chain costs for the third quarter.

Ford set that an inability get all the parts it needs could delay delivery for more than 40,000 vehicles to dealerships. The company did say it expects those vehicles to be moved during the fourth quarter and reiterated its full-year guidance for adjusted earnings before interest and taxes.

— Jesse Pound

Stock futures open higher

U.S. stock futures opened modestly higher on Monday evening, suggesting that the late-day rise for equities may carry over into the next session.

Nasdaq 100 futures were the early leaders, but were still up just 0.2%.

Jesse Pound

Stocks break losing streak on Monday

The three major indexes ended positive today — breaking multi-day losing streaks — as the markets came out of last week’s sell-off.

  • SPDR S&P 500 and Invesco QQQ both surpassed their 30-day average volume.
  • Approximately three stocks in the New York Stock Exchange advanced for every two that declined.
  • Nine of 11 sectors were positive, with materials up the highest at 1.6%. Of those that fell, health care posted the greatest loss going down approximately 0.5%.
  • The U.S. two-year, five-year and 10-year Treasury notes all hit highs not seen in more than a decade.
  • DJ Transports gained nearly 2%, breaking a four-day losing streak. It was the largest gain of any of the major U.S. indices, which all were positive at the close.

— Alex Harring, Chris Hayes