US stock market indices fell and the sale of technology stocks deepened, as investors’ concerns about economic growth and rising interest rates continued to weigh on the market.
The S&P 500 fell 1.5% in the early hours of Tuesday afternoon, reducing previous losses. The Dow Jones Industrial Average lost 0.7%, while the Nasdaq Composite, with a lot of technology, fell 2.7%.
Investors are considering a series of signals as they try to chart the trajectory of the US economy. Many have worried that the Federal Reserve’s plans to tighten inflation to curb inflation could plunge the economy into a recession.
Tuesday’s losses point to a sharp turnaround as of Monday, when major U.S. indices rebounded after a volatile trading session the previous week. But a earnings and revenue announcement on Monday afternoon from social media company Snap once again hurt investor sentiment. A disappointing report on Tuesday showed that new home sales in the United States in April further reduced mood.
Shares of Snap fell 40% on Tuesday as investors digested comments that the macroeconomic environment has deteriorated more than expected. Concerns about interruptions in Snap’s advertising revenue have affected other technology actions that have been affected this year. Meta platforms fell 9.3% and Alphabet, Google’s parent company, down 6.7%.
Meanwhile, new home sales data, well below economists’ expectations, are another sign that Fed interest rate hikes are already holding back the real economy, said Steven Ricchiuto, the chief economist at Mizuho Securities USA.
“It’s a pretty weak figure,” he said, saying the figures are a sign that more homebuyers are being kicked out of the market as mortgage interest rates rise.
Concerns about a slowdown in growth amid higher inflation have been one of the catalysts for the S&P 500 to fall 17% through Monday from its January high. Investors are watching closely for the S&P 500 to enter bearish territory, defined as a drop of at least 20% from a recent high. On Friday, the benchmark was close to ending in a bearish market before being saved by a rebound in the final session.
On Tuesday, as the big tech companies suffered a draft, stocks with more interest in the physical economy suffered lower losses or gains. The commodity and packaging sectors of the S&P 500 were the only two of the 11 components of the index in positive territory.
Tim Courtney, chief investment officer of Essential Wealth Advisors, saw this as a sign that inflation and the Fed’s response continued to be a major concern for many investors than the fundamental health of the economy.
Wealth management clients had been quietly taking the stock market crash this year, but as bear market levels have approached the S&P 500, their fears have increased, Courtney said.
“Over the last week, as we have moved closer to the magic barrier of the bear market, I think concerns have started to rise,” he said.
Disappointing gains and warnings across the corporate landscape have exacerbated fears. Abercrombie & Fitch on Tuesday became the latest retailer to hit investor sentiment after suffering a first-quarter loss amid higher costs. Shares of the company fell 28%.
Mr. Mizuho’s Ricchiuto warned that as more analysts accept the Fed’s strong determination to control inflation, Wall Street’s expectations of corporate earnings could weaken further, causing stock prices to fall further.
There have been cracks of optimism, however. On Monday, JPMorgan Chase said U.S. consumers appear to be in good financial health. But that optimistic performance was quickly counteracted by the disclosure of Snap, a company that had never before issued a revenue notice.
“We will have this roller coaster for a while, as investors cling to more optimistic data points and feel a new disappointment when there is another poor reading,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown. “We still don’t know the full path of rising interest rates or the resilience of consumers.”
Despite Tuesday’s widespread tech sell-off, there were bright spots in the market. Zoom Video Communications rose 2.1% after the video conferencing services company raised its profit prospects.
On Tuesday, Fed Chairman Jerome Powell will deliver a speech at an economic summit in Las Vegas. Investors will look for new clues about their inflation outlook, the economy and the trajectory of rising interest rates.
Tuesday’s sell-off of technology stocks led investors to collect government bonds, with the yield on the U.S. Treasury’s 10-year benchmark falling to 2.749% from 2.857% on Monday. Yields fall as bond prices rise.
Gold, considered another safe haven, rose 0.9% to $ 1,864.70 per troy ounce.
Traders traded on the New York Stock Exchange on Monday.
Photo: Spencer Platt / Getty Images
Brent crude, an international benchmark for oil, rose 0.6% to $ 114.10 a barrel, reversing pre-session losses.
“You have that push and pull with oil prices: oil prices are staying a little lower because of global growth, which is not a big indicator for the health of the global economy,” Ms. Streeter. “But at the same time, it is no longer falling because of concerns about reduced supply.”
In Europe, the pan-continental Stoxx Europe 600 lost 1%. In Asia, Hong Kong’s Hang Seng fell 1.7%. Japan’s Nikkei 225 lost 0.9% while China’s Shanghai Composite fell 2.4%.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Matt Grossman to matt.grossman@wsj.com
Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8