Fed Decision Looms as US Stocks Slide on Inflation Fears

The US stock market is continuing its downward trend as investors await the Federal Reserve's decision on interest rates, expected to be announced on Wednesday. The S&P 500 slipped 0.2%, while the Dow Jones Industrial Average dropped 289 points (0.6%) and the Nasdaq composite fell 0.3%. This comes after a worldwide slide in artificial-intelligence stocks, led by Nvidia, which rose 1.1% on Tuesday after its heavy drop the day before.

The main event for the market is Wednesday's Fed decision, with widespread expectations that it will hike the federal funds rate for the first time in three years to combat high inflation, currently above 3%. This move would make borrowing money more expensive for US households and businesses, potentially inflicting short-term pain on the economy.

Worries about high inflation and the massive U.S. government debt level have already sent bond yields soaring, with the yield on the 10-year Treasury reaching 5.00%, a level unseen in years. This has led to concerns that investors may become less willing to pay premium valuations for stocks as they can earn more from bonds.

Oil prices are also contributing to the rise in bond yields, with Brent crude up 0.7% to $106.42, significantly above its level before the war with Iran began in February. The Federal Reserve's decision and forecasts for interest rates will provide further uncertainty for investors.