By Noel Randewich and Shreyashi Sanyal
Sept 27 (Reuters) – Wall Street sank deeper into a bear market on Tuesday, with the S&P 500 recording its lowest close in two-years as Federal Reserve policymakers showed an appetite for more interest rate hikes, even at the risk of throwing the economy into a downturn.
The benchmark S&P 500 .SPX is down about 24% from its record high close on Jan. 3. Last week, the Fed signaled that high rates could last through 2023, and the index erased the last of its gains from a summer rally and recorded its lowest close since November 2020.
Speaking on Tuesday, St. Louis Fed President James Bullard made a case for more rate hikes, while Chicago Fed President Charles Evans said the central bank will need to raise rates by at least another percentage point this year.
“It’s disappointing, but it’s not a surprise,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “People are concerned about the Federal Reserve, the direction of interest rates, the health of the economy.”
Analysts at Wells Fargo now see the U.S. central bank taking its target range for the Fed funds rate to between 4.75% and 5.00% by the first quarter of 2023.
Most of 11 S&P 500 sector indexes fell, with utilities .SPLRCU and consumer staples .SPLRCSweighing heavily.
The energy sector index .SPNY rallied after Sweden launched a probe into possible sabotage after major leaks in two Russian pipelines that spewed gas into the Baltic Sea.
Microsoft MSFT.O and Google-parent Alphabet GOOGL.O each dipped for much of the session.
The benchmark U.S. 10-year Treasury yield US10YT=RR touched its highest level in more than 12 years amid the hawkish comments from Fed officials. US/
According to preliminary data, the S&P 500 .SPX lost 6.49 points, or 0.18%, to end at 3,648.55 points, while the Nasdaq Composite .IXIC gained 30.73 points, or 0.28%, to 10,833.65. The Dow Jones Industrial Average .DJI fell 112.54 points, or 0.38%, to 29,148.27.
Concerns about corporate profits taking a hit from soaring prices and a weaker economy have also roiled Wall Street in the past two weeks.
Analysts have cut their S&P 500 earnings expectations for the third and fourth quarters, as well as for the full year. For the third quarter, analysts now see S&P 500 earnings per share rising 4.6% year-over-year, compared with 11.1% growth expected at the start of July.
(Reporting by Ankika Biswas, Shreyashi Sanyal and Susan Mathew in Bengaluru; Editing by Shounak Dasgupta, Arun Koyyur and David Gregorio)
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