Stocks pulled back Tuesday as a sell-off that has engulfed Wall Street in recent weeks resumed after two straight winning sessions. The Dow Jones Industrial Average lost 260.32 points, or 0.62%, closing at 41,581.31. The S&P 500 shed 1.07%, ending at 5,614.66.
The broad market index concluded the day 8.6% off its closing high reached in February, bringing it near correction territory. The Nasdaq Composite dropped 1.71% and settled at 17,504.12. Among the hardest-hit stocks was Tesla, which fell more than 5% after RBC Capital Markets downgraded the stock, citing rising competition in the EV space.
Tesla has declined more than 36% over the past month. Major tech names also saw significant declines, with Amazon and Microsoft shares dropping nearly 4% and 3%, respectively. “It appears the market really does want to rotate into things that haven’t worked as well and out of things that did work well for the last couple of years,” said Rhys Williams, chief investment officer at Wayve Capital.
The markets are going to remain choppy up until whatever decision is made on April 2,” Williams added, referring to President Donald Trump’s tariffs on some imports from Canada and Mexico. The declines follow a turbulent period on Wall Street. The S&P 500 entered correction territory last week, but made up some ground with recovery rallies on Friday and Monday.
Despite the recent bounce, the tech-heavy Nasdaq still sits in a bear market, a term used to describe an index falling at least 10% from a recent high. The three major averages all remain down on the year, underscoring the strength of the market’s pullback. While investors continue to follow updates from the White House, their attention is turning to the Fed’s two-day policy meeting that kicked off Tuesday.
Traders will closely follow Wednesday afternoon’s interest rate announcement and subsequent press conference with Fed Chair Jerome Powell.
Stocks resume pullback after brief recovery
Fed funds futures are pricing in a strong likelihood that the central bank holds rates steady, according to CME’s FedWatch Tool.
Stocks could see more pullback from current trading levels, according to Ross Mayfield, an investment strategist at Baird. “Your average non-recession pullback or correction is in the 15% range, which is not all that different from what the average entry year drawdown is over the last 40 or 50 years anyway, so would I be surprised at all if we reenter correction territory and press toward 14% or 15%? Not at all,” he told reporters.
“I don’t think that a recession is imminent, and without more significant economic weakness, I think that’s probably the extent of it,” he added. MicroStrategy, now known as Strategy, plans to raise about $500 million in an offering of a new class of preferred stock known as perpetual “Strife” to fund more of its bitcoin purchases. The company will offer five million shares of Strife at $100 per share, accruing a 10% annual dividend rate payable quarterly in cash beginning June 30.
Strategy has bought about 500 million bitcoin worth more than $40 billion, largely funded through debt and equity sales. This follows a plan announced last week to raise $21 billion through perpetual “Strike” (STRK) preferred stock. Investors should brace for more downside ahead even if there is a near-term rally in the market, according to Janney Montgomery Scott.
We believe there may be more upside for stocks on a short-term basis, as the major benchmarks we track have yet to make key Fibonacci retracements on their charts,” wrote Dan Wantrobski, the firm’s associate director of research. Wantrobski noted that the S&P 500 could fall further to 5,000 or even lower to 4,650, implying downside of nearly 12% to 18% from Monday’s close. The stock market hasn’t bottomed yet, with further volatility likely through May, according to Wolfe Research.
We don’t believe the market has bottomed yet, as we expect further choppy inflation and employment data over the next few months,” said Chris Senyek, chief investment strategist at Wolfe Research. Bank of America’s Global Fund Manager Survey showed a “bull crash” this month. The widely followed investor survey indicated significant bearish sentiment among investors, further highlighting the uncertain outlook for the market.
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