The Fed is meeting next week and is expected to raise interest rates by a half-percentage point. It has raised its benchmark rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25% by the middle of 2023.
Investors are closely watching economic data and company announcements to get a better sense of how the economy is handling stubbornly hot inflation. They are also trying to determine whether inflation is easing at a pace that will allow the Fed to ease up on interest rate increases. The Fed's policy risks hitting the brakes on the economy too hard and sending it into a recession.
Stocks lost ground again on Wall Street in afternoon trading Tuesday as traders ponder the Federal Reserve's next moves in its campaign to cool stubbornly hot inflation.
Technology stocks, communication companies and retailers had some of the biggest losses. Apple fell 2.6%, Disney slid 3.4% and AutoZone dropped 3.2%.
The broader market's dip comes a day after stocks pulled back as stronger-than-expected readings on the economy raised worries that the Fed has a ways to go in getting inflation under control. The Fed is doing that by intentionally slowing the economy with higher interest rates.
Small company stocks also fell, pulling the Russell 2000 index 1.9% lower. The major indexes are on pace for a weekly loss after posting two straight weekly gains.
Bond yields mostly fell. The yield on the 10-year Treasury slid to 3.52% from 3.58% late Monday.
European markets ended mostly lower and Asian markets closed mixed.
Several companies made big moves following financial updates and buyout announcements.
Utility NRG Energy slumped 16.3% after announcing it is spending $2.8 billion in cash and assuming $2.4 billion in debt to buy Vivint Smart Home.
Jewelry company Signet vaulted 18% after raising its profit and revenue forecasts for the year.
The S&P 500 fell 1.3% as of 3:01 p.m. Eastern, with roughly 90% of the stocks in the benchmark index in the red. The Dow Jones Industrial Average fell 435 points, or 1.3%, to 33,511 and the Nasdaq fell 2.1%.
Wall Street will get a weekly update on unemployment claims on Thursday. The job market has been one of the stronger pockets in the economy.
Investors will get important updates on inflation and how consumers are dealing with high prices later in the week.
On Friday, the government will release its November report on producer prices. That will give investors more insight into how inflation is impacting businesses.
The University of Michigan will release its December survey on consumer sentiment on Friday.
With growing concerns about a recession, Fitch Ratings revised its forecasts for world economic growth downward to reflect the Fed's and other central banks' interest rate hikes.
The ratings agency's Global Economic Outlook report estimated global growth at 1.4% in 2023, revised down from 1.7% in its September forecast. It put U.S. growth in 2023 at 0.2%, down from 0.5%, as the pace of monetary policy tightening increases.
Elaine Kurtenbach and Matt Ott contributed to this report.