U.S. stocks fell as volatility returned to markets with investors assessing prospects for earnings growth amid the outlook for monetary policy tightening. The drop in the Nasdaq Composite pushed it over the threshold into correction territory.

The S&P 500 retreated, erasing earlier gains, while the Nasdaq Composite dropped 10% from November high, as declines in megacap stocks including Amazon.com, Tesla and Apple weighed on the benchmarks. Treasury yields fell across the curve, even as expectations grow that the U.S. 10-year will top 2%. A dollar gauge declined for the first time in four days.

Global equities have had a volatile start to the year, hurt by a more hawkish Federal Reserve stance, economic disruptions from omicron and risks to company profits due to rising costs. Stocks gained in early trading as earnings from companies including Bank of America Corp. and Procter & Gamble Co. bolstered sentiment.

'Right now you have people waiting before they go and buy back in. You have a Fed meeting coming up, so there's not going to be a lot of movement anywhere until the Fed meeting is over with,' said Jamie Cox, managing partner at Harris Financial Group. 'You look around, there's not a lot of problems in the economy, what you have is just the question of, 'does all this add up to a faster rate hiking cycle that we anticipate?' And I don't think so. I think it's not likely.'

Earnings optimism and dip-buyers vied with speculation that the Federal Reserve may deliver more than a quarter-percentage point March interest-rate hike to fight inflation, while the Bank of England may move again next month. Britain's inflation rate surged unexpectedly to the highest since 1992 and Germany's 10-year yield turned positive for the first time since 2019, before dipping back below zero.

'We are in late stage of the cycle, where equities will post lower returns due to weaker growth and higher rates, but we expect the ongoing correction to be short,' Luca Paolini,, chief strategist at Pictet Asset Management, said by email. He's forecasting the S&P 500 index at 5000 and U.S. 10-year yields at 2% by the end of the year.

Oil held gains above the highest close since 2014 as the International Energy Agency said the market looked tighter than previously thought, with demand proving resilient to the omicron virus strain.

In China, where policy is diverging from the U.S., the central bank has pledged to use more monetary policy tools to aid the economy and ease credit stress amid a real-estate slump.

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Stocks:

- The S&P 500 fell 0.2% as of 11:32 a.m. New York time.

- The Nasdaq 100 fell 0.3%.

- The Dow Jones Industrial Average was little changed.

- The Stoxx Europe 600 rose 0.2%.

- The MSCI World index fell 0.3%.

Currencies:

- The Bloomberg Dollar Spot Index fell 0.2%.

- The euro rose 0.2% to $1.1353.

- The British pound rose 0.3% to $1.3631.

- The Japanese yen rose 0.3% to 114.25 per dollar.

Bonds:

- The yield on 10-year Treasuries declined four basis points to 1.84%.

- Germany's 10-year yield was little changed at -0.01%.

- Britain's 10-year yield advanced four basis points to 1.25%.

Commodities:

- West Texas Intermediate crude rose 2% to $87.14 a barrel.

- Gold futures rose 1.5% to $1,839.50 an ounce.

iol