Stocks rebound from earlier losses in volatile trading ahead of the Fed decision, Dow gains 100 points

Traders work on the floor of the New York Stock Exchange during afternoon trading on September 13, 2022 in New York City.

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Stocks rebounded from their earlier losses on Monday in a volatile trading session ahead of the Federal Reserve’s two-day policy meeting slated to begin this week.

The Dow Jones Industrial Average traded 126 points, or 0.41% higher, while the S&P 500 and Nasdaq Composite gained 0.29% and 0.23%, respectively.

Investors are focused on the Fed’s latest policy meeting slated to begin Tuesday. The central bank is expected to raise interest rates by another three-quarters of a point, although investors are also watching for guidance about corporate earnings before the next reporting season begins in October.

“It’s a very low conviction market heading into the Fed,” said Truist’s Keith Lerner. “Maybe you’re seeing some same signs of stabilization. But I think that’s more reflecting that you just went down pretty hard and you don’t move in a straight line, and we have the Fed coming up and the market has already been pretty hawkish heading into this meeting.”

In other news, the 10-year Treasury yield topped 3.5% on Monday, its highest level in 11 years as rates across the board continued to rise ahead of the Fed’s likely decision this week to raise its benchmark rate by another three-quarters of a point to snuff out inflation. After some brief hope over the summer that the Fed may be done its aggressive tightening campaign soon, investors have started dumping stocks again on fears the central bank will go too far and tip the economy into a recession.

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All 11 major S&P 500 sectors rose or traded flat, led to the upside by consumer discretionary, industrials, financials and materials. Health care was the laggard, falling 1.3%.

Stocks slid last week as investors reacted to a hotter-than-expected inflation report and a dismal warning from FedEx about a “significantly worsened” global economy. The major averages posted their fourth weekly loss in five weeks and hovered near two-month lows.

Beyond the Fed meeting, there are just a few economic data releases on deck this week, including August housing starts on Tuesday and initial jobless claims on Thursday.

—CNBC’s Patti Domm contributed reporting.

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