Stocks close higher as Wall Street braces for Fed meeting

U.S. stocks found their footing in the final hour of back-and-forth trading Monday after all three major indexes logged their worst week in three months.

The S&P 500 climbed about 0.7%, while the Dow Jones Industrial Average rose nearly 200 points, or 0.6%. The tech-heavy Nasdaq gained 0.8%.

In the bond market, the benchmark U.S. 10-year Treasury touched 3.5%, its highest level since 2011, while the 2-year Treasury note inched toward 4%.

Investors are gearing up for the Federal Reserve’s two-day policy meeting on Sept. 20-21. The U.S. central bank is expected to deliver a third-straight 75-basis-point increase at the conclusion of discussions on Wednesday at 2:00 p.m. ET.

Higher-than-expected inflation data last week sparked a sell-off across U.S. equity markets after renewing fears the Fed will ramp up the magnitude of its monetary tightening efforts and tip the economy into a recession. The benchmark S&P 500 shed 4.7% for the week, the Dow Jones Industrial Average fell 4.1%, and the tech-heavy Nasdaq Composite tumbled 5.5%.

A pre-earnings warning from shipping giant FedEx (FDX) also exacerbated growth concerns on Friday after the company said a global recession could be underway, withdrawing its full-year guidance on macroeconomic trends that have “significantly worsened.”

Of S&P 500 companies that held earnings calls from June 15 through Sept. 8, 240 cited the term “recession” – the highest number citing the term since at least 2010, and well above the five-year average of 52, according to data from FactSet research.

As investors barrel into the earnings season, Wall Street strategists are sounding the alarm on earnings expectations, with macroeconomic headwinds including inflation and rate pressures increasingly showing signs of weighing on corporate margins.

Bank of America’s Michael Hartnett warned in a recent note that earnings cuts will be the catalyst for a deeper sell-off and sees the S&P 500 teetering towards 3,600 – and even 3,000 in the bear case. As of Friday’s close, the index was at 3873.33.

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As Fed worries kept investors in a risk-off mood, the sentiment was also felt across cryptocurrency markets. Bitcoin (BTC-USD) tumbled below $19,000 before clawing back above that level, and Ethereum (ETH-USD) extended a slide to hover near $1,300 after its highly anticipated “merge” last week.

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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