By Yasin Ebrahim
Investing.com – The S&P 500 cut the bulk of losses Monday, as investors bought the dip in stocks even as Federal Reserve is expected to signal a faster pace of monetary policy tightening later this week.
The S&P 500 fell 0.2%, after falling into correction terriroty intraday. The Dow Jones Industrial Average slipped 0.18%, or 60 points, the Nasdaq gained 0.1%.
Battered growth sectors of the market like tech, communication services, and consumer discretionary found support after a plunge intraday as investors bought the dip in megacap tech.
Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Meta Platforms (NASDAQ:FB) ended the day well off their session lows.
The turnaround in the broader market comes just two days to go until the Federal Reserve delivers its update on monetary policy, with many fear the U.S. central bank will lean hawkish and confirm current expectations on Wall Street for a faster pace of rate hikes.
“The January FOMC meeting should continue the Fed's hawkish policy pivot by signaling that it will soon be appropriate to begin removing accommodation,” Deutsche Bank. On the policy rate, the meeting statement and Chair Powell's press conference should confirm that liftoff is likely in March.”
U.S. bond yields, which trade inversely to prices, were in the red, but have racked up gains of late in the weeks lead up to the Fed meeting.
Netflix (NASDAQ:NFLX), which fell the most since 2012 last week following disappointing guidance, cut losses to trade down 3%/
Snap (NYSE:SNAP), meanwhile, pared some losses despite Wedbush downgrading its rating on social media stock to neutral from outperform, citing concerns over rising competition and the impact of Apple’s privacy changes.
“[W]e see risk to Snap’s revenue growth targets stemming from IDFA headwinds, difficult comps from stellar growth in 2020-21, and increasing competition from TikTok in particular,” Wedbush said in a note.
Cyclical stocks including energy and financials, which made a strong start to the year, also found support.
Energy ended the day roughly flat after falling 3% as oil prices pared losses at at time when analysts’ continue to price in the risk of potential supply disruptions amid rising geopolitical tensions.
“The further escalation of the Ukraine conflict and the fraught security situation in the Middle East justify a risk premium on the oil price because the countries involved – Russia and the U.A.E. – are important members of OPEC+,” Commerzbank said in a note.
Kohls (NYSE:KSS), however, sidestepped the broader market selloff, rallying more than 30% on reports that the company has attracting offers from two suitors.
Peloton Interactive (NASDAQ:PTON) also gained on investor bets of the potential deal activity after activist investor Blackwells Capital urged the exercise equipment company to fire chief executive John Foley.