S&P 500 falls led by tech shares before an update from the Fed

S&P 500 falls led by tech shares before an update from the Fed

U.S. stocks fell Wednesday as investors await the outcome from the Federal Reserve’s two-day policy meeting and comments from Fed Chair Jerome Powell later in the day.

The S&P 500 traded 0.4% lower. The Nasdaq Composite lost 1.1% as technology shares got hit by rising bond yields again. Apple, Alphabet, Facebook and Netflix all traded in the red. Tesla shed more than 2%. The Dow Jones Industrial Average gained 40 points.

The 10-year Treasury yield rose to a fresh 13-month high in early trading. The yield climbed 5 basis points above 1.67%, the highest since early February 2020 and exceeding its recent high on Friday of 1.642%. The 30-year rate jumped to 2.428%, its highest level since November 2019. Higher rates erode the value of future cash flows, hurting growth-oriented companies particularly hard.

On Wednesday, the Fed will release new economic and interest rate forecasts, which could indicate Fed officials expect to raise rates by, or even before, 2023. The central bank is expected to acknowledge stronger growth, which should put the Fed’s easy policies in the spotlight, especially given the new $1.9 trillion in federal stimulus spending.

Investors will also hear from Fed Chair Powell, who is likely to move the stock and bond markets with his commentary, despite being unlikely to offer specifics.

“There’s this assumption [Powell’s] going to be dovish tomorrow. With another round of spending, it’s hard for him not to be dovish. They are definitely afraid of scaring the market. They’re afraid of disrupting the recovery,” said Peter Boockvar, chief investment officer of Bleakley Advisory Group.

Rising interest rates have been an overhang for stocks in recent weeks, specifically the tech sector. The jump in yields has forced a shift into value stocks from growth, pushing the Dow Jones Industrial Average and S&P 500 to hover near record highs.

A strong vaccine rollout and the easing of state lockdown restrictions have also boosted reopening stocks.

Boeing rose 1.2%, while Carnival and Norwegian Cruise Line both traded up more than 1%. Shares of McDonald’s climbed 1% after Deutsche Bank upgraded the stock to buy from hold.

—CNBC’s Patti Domm contributed to this report.