US stocks extend losses after Brainard's Fed policy comments, oil falls

U.S. stocks finished near session lows on Tuesday after Federal Reserve Governor Lael Brainard said the central bank would "continue tightening monetary policy methodically through a series of interest rate increases" and start to reduce the balance sheet at a rapid pace as early as May.

The Dow Jones Industrial Average ended Tuesday's session down 280.70 points at 34,641.18, while the S&P 500 fell 1.26%. The Nasdaq Composite plunged 2.26%, marking its worst day since March 7.

Ticker	Security	Last	Change	Change %
I:DJI	DOW JONES AVERAGES	44782	-128.65	-0.29%
SP500	S&P 500	6047.15	+14.77	+0.24%
I:COMP	NASDAQ COMPOSITE INDEX	19403.947849	+185.78	+0.97%

"Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017–19," Brainard said in prepared remarks to the Minneapolis Fed's Spring 2022 Institute Research Conference. "I expect the combined effect of rate increases and balance sheet reduction to bring the stance of policy to a more neutral position later this year, with the full extent of additional tightening over time dependent on how the outlook for inflation and employment evolves."

She added that inflation is "much too high" and that the Fed is prepared to take stronger action to bring it down if warranted. The yield on the 10-year Treasury spiked above 2.5% following Brainard's comments.

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Elsewhere, oil fell 2.4% as reports of new sanctions coming in the Russia-Ukraine conflict worried investors. Oil remains above the $100 per barrel mark.

Russia’s invasion of Ukraine has elevated concerns about rising inflation and the impact on global economic growth. Prices for everything from food to clothing were already rising and the war has added to the volatility of energy prices.

The World Bank downgraded its 2022 growth forecast for the Asia-Pacific region to 5% from 5.4%, in part due to disruptions to supplies of commodities, financial strains and higher prices. That follows a rebound to 7.2% growth in 2021 after many economies experienced downturns with the onset of the pandemic. The report forecasts slower growth and rising poverty in the Asia-Pacific region this year as "multiple shocks" compound troubles for people and for businesses.

In economic data, the S&P Global Markit services PMI for March was revised down to a reading of 58, up from 56.5 in February, but lower than the earlier-released flash estimate of 58.9. 

Meanwhile, the ISM services index for March came in at a reading of 58.3, up from 56.5 in February. The business activity component of the index came in at 55.5, up slightly from 55.1 the previous month. The new orders and employment components came in at 60.1 and 54 in March, up from 56.1 and 48.5 in February, respectively. 

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In stocks, shares of Spirit Airlines soared 22% following news that JetBlue made an offer of $33 per share in cash to acquire the carrier. The offer, which implies a fully diluted equity value of $3.6 billion, comes less than two months after Frontier said it would buy Spirit in a $3 billion deal. 

JetBlue said that it "firmly believes its proposal constitutes a "superior proposal" under Spirit’s merger agreement with Frontier and represents the most attractive opportunity for Spirit’s shareholders."

Ticker	Security	Last	Change	Change %
SAVE	NO DATA AVAILABLE	-	-	-
JBLU	JETBLUE AIRWAYS CORP.	6.19	+0.22	+3.69%
ULCC	FRONTIER GROUP HOLDINGS	6.13	+0.30	+5.15%

Twitter continued its climb after Tesla CEO Elon Musk was named to the company's board. Shares soared 27% during Monday's trading session, rallying on Musk's disclosure of a 9.2% stake in the company, making him Twitter's largest shareholder. 

Ticker	Security	Last	Change	Change %
TWTR	NO DATA AVAILABLE	-	-	-

Carnival Cruise Line rose as much as 7% on Tuesday after reporting that March 28 to April 3, 2022, was the busiest week for new cruise bookings in the company’s history.

Ticker	Security	Last	Change	Change %
CCL	CARNIVAL CORP.	25.43	+0.29	+1.15%

Meanwhile, Carvana slid as much as 9% after being downgraded from "outperform" to "sector perform" by RBC Capital Markets, with its price target for the online car seller's stock lowered from $155 per share to $138 per share.

Ticker	Security	Last	Change	Change %
CVNA	CARVANA CO.	254.95	-0.99	-0.39%

Shares of crypto exchange Coinbase have also dropped over 7% after Mizuho cut its price target from $220 to $190 per share. The investment firm questioned Coinbase's plan to launch a non-fungible token (NFT) platform, citing "dwindling" interest from the public.

Ticker	Security	Last	Change	Change %
COIN	COINBASE GLOBAL INC.	312.22	+7.58	+2.49%

In international markets, Hong Kong's Hang Seng index climbed 2.1%, the Shanghai Composite Index rose 0.9% and the Nikkei 225 was up 0.19%. Meanwhile, the CAC 40 tumbled 1.28%, the Euro Stoxx 50 fell 0.8% and the TSX finished down 0.7%. 

The Associated Press contributed to this report.