S&P 500 dips to low 4300s as momentum from Monday’s late session rally fails to carry through

• US equities have turned lower again on Tuesday as markets continue to fret ahead of Wednesday’s Fed policy announcement.
• The S&P 500 is down 1.6%, the Nasdaq 100 2.5% and the Dow 0.8%.

After Monday’s stunning late-session recovery that saw the major US indices post and incredible recovery from intra-day lows, sentiment has taken a turn for the worse again. The S&P 500, which recovered a more than 4.0% dip to as lows as the 4220s on Monday to close above 4400, is trading about 1.6% lower on Tuesday in the 4320 area, though has admittedly recovered from a brief dip under 4300. At current levels, the index now trades with losses of about 1.9% on the week and 9.5% on the month. If the S&P 500 closes at current levels, it will confirm a correction (or 10% drop) from recent record highs printed back at the start of the year above 4800.

Strong Q4 earnings releases from blue-chip companies 3M and IBM failed to lift the mood, with markets instead opting to fret about the potential outcome of Wednesday's Fed policy announcement. The two-day Fed meeting kicks off on Tuesday and the bank is expected to give the green light to multiple rate hikes (starting in March) in 2022 as well some ideas for potential quantitative tightening plans. Ahead of that, earnings from mega-cap tech giant Microsoft after Tuesday’s close offer the opportunity to lift market sentiment ahead of earnings from Apple and Tesla later in the week.

Looking at the other major US indices; with tech leading the equity market decline on Tuesday, the Nasdaq 100 is the underperformer, down 2.5% on the day, taking its on-the-year losses to 13.5%. The Dow, meanwhile, was last down about 0.8% near the 34K level, though did recover from a brief intra-day dip as low as the 33.6K where it traded as much as 2.4% down. The S&P 500 Volatility Index, which nearly went as high as 40.00 on Monday, its highest since November 2020 at the time, was stable in the 32.50 area.