S&P 500 slips as investors assess tensions in China, Fed commentary study finds

The S&P 500 fell on Tuesday as investors assessed heightened tensions between the United States and China over the visit to Taiwan by House Speaker Nancy Pelosi and reacted to comments from Federal Reserve chairs on the way forward. by the central bank.

The S&P 500 slid 0.17% after falling nearly 1% earlier in the session. The benchmark had already hit lows when Pelosi’s plane landed safely in Taiwan on Tuesday morning. The Dow Jones Industrial Average also lost 220.26 points, or 0.67%, dragged down by Caterpillar, which lost more than 3% after posting disappointing quarterly results.

The Nasdaq Composite was the outlier, up 0.15%, boosted by a huge post-earnings gain from Uber.

Stocks faltered in the early afternoon, reacting to multiple comments from regional Fed chairs who all threw cold water on the idea that the Fed will be done raising rates or lowering them by so early.

Chicago Fed Chairman Charles Evans said he hoped the central bank could raise its benchmark interest rate by half a percentage point in September and then continue with increases of a quarter. point until the start of the second quarter in 2023. San Francisco Fed President Mary Daly said the central bank still has work to do to fight inflation.

Later, Cleveland Fed Chair Loretta Mester said several more months of evidence that inflation had peaked were needed before the Fed ended its rate hike cycle.

Pelosi is expected to spend the night in Taiwan, Reuters reported. Prior to the trip, Chinese officials threatened action if Pelosi continued his visit. Pelosi is the first Speaker of the House since Newt Gingrich in 1997 to visit Taiwan.

“I don’t think the trip will cause any real economic disruption, but of course the rhetoric and headlines are starting to ramp up and that’s something we need to watch going forward,” said Mona Mahajan, Edward Jones’ senior investment strategist, on CNBC’s “Squawk Box” on Tuesday. “Geopolitical tension has been a theme that we’ve really seen all year and that has weighed on the markets.”

Merchants are also expecting another round of revenue from companies such as Starbucks, PayPal and Advanced Micro Devices on Tuesday after the bell. On the economic data front, investors are awaiting the July nonfarm payrolls report this week, due out on Friday, for further clues about the state of the economy and the labor market.