S&P 500, Nasdaq Fall in Volatile Session as Tech Stocks Drop

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Nasdaq slips more than 2%; New-home sales data below economists’ expectations

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Investors are considering a variety of signals as they try to map the trajectory of the US economy. Many have become concerned that the Federal Reserve’s plan of monetary tightening to reduce inflation could push the economy into recession.

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“Usually the catalyst for the turnaround is the Fed,” said Ros Koestreich, who co-manages a global-allocation fund for BlackRock.,

“This time around, it’s clearly harder for the Fed to ride to the rescue, given the fact that they have a lot of work to do to bring inflation down.”

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Tuesday’s loss points to a sharp return from Monday, when major US indices were halted after a volatile trading session last week. But investor sentiment was again soured by a late Monday night profit and revenue warning from social-media company Snap. A disappointing report Tuesday showing slow US new-home sales in April worsened the mood.

Shares of Snap fell 44% on Tuesday afternoon as investors digested comments that the macroeconomic environment has turned worse than expected. Worries about the disruption to Snap’s ad revenue stymie other tech stocks that have been battered this year. The Meta platform fell 7.9% and Google parent Alphabet 5.1%.

Meanwhile, home sales data, well below economists’ expectations, is another sign that the Fed’s interest rate hike is already slowing the real economy, said Steven Ricciutto, chief economist at Mizuho Securities USA.

“This is a very weak number,” he said, adding that the trend is a sign that more home buyers are being squeezed out of the market as interest rates on mortgages rise.

Concerns about slowing growth amid high inflation have been among the catalysts that sent the S&P 500 falling 17% from January’s highs on Monday. Investors are now keeping a close eye on whether the S&P 500 enters bear market territory, defined as a decline of at least 20% from recent highs. On Friday, the benchmark index moved closer to the finish in a bear market before being saved from a late-session rally.

On Tuesday, as big tech companies took the drubbing, stocks with more footholds in the physical economy narrowed losses or gains. S&P 500 sectors such as consumer staples, energy and real estate found their foot in positive territory in the afternoon.

Tim Courtney, chief investment officer at Accentual Wealth Advisors, took this as a sign that inflation, and the Fed’s response, remains a bigger concern for many investors than the fundamental health of the economy.

Mr. Courtney said wealth-management clients were facing a stock market slump this year, but their fears have increased as bear levels approach the S&P 500.

“Last week, as we approached that magical bear-market hurdle, I think concerns started to mount,” he said.

Tuesday’s selloff in technology stocks sent investors scooping up government bonds, with the yield on the benchmark 10-year US Treasury note down from 2.857% on Monday to 2.756%. A bond’s yield falls when its price rises.

BlackRock’s Mr Kostrich said turbulent trading in both the stock and bond markets this year has prompted his team to keep more cash in the fund’s portfolio.

“Voltage in rate markets has been a major reason for volatility in stock markets. “In that environment, cash becomes one of the most effective risk mitigators.”

Disappointing earnings and warnings in the corporate scenario have added to the apprehensions. Abercrombie & Fitch became the latest retailer to dent investor sentiment on Tuesday, as it plunged into a first-quarter loss amid higher costs. The company’s shares fell 31 per cent.

Mizuho’s Mr Ricciutto warned that as more analysts come to terms with the Fed’s stronger resolve to control inflation, Wall Street’s expectations for corporate earnings could weaken further, pushing stock prices even lower. Huh.

However, there have been flashes of optimism. JPMorgan Chase said on Monday that US consumers are in good financial condition. But that sobering portrayal was quickly counterbalanced by revelations from Snap, a company that had never issued a revenue alert before.

“We’re going to ride this roller-coaster for some time,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdowne, as investors stick to more optimistic data points and when another downbeat reading arrives, They find new disappointments.” , “We don’t yet know the full path of increasing interest rates or how flexible consumers will be.”

Despite the widespread technology sell-off on Tuesday, the market had bright spots. Zoom Video Communications was up 4.6% after the videoconferencing services company raised its profit outlook.

Gold, considered another haven asset, rose 0.9% to $1,864.40 per troy ounce.

International oil benchmark Brent crude rose 0.2% to $113.69 a barrel.

“You’ve got this push and pull with oil prices – oil prices being held down somewhat by global growth, which is not a great indicator for the health of the global economy,” Ms Streeter said. “But at the same time, it’s not falling any more because of concerns about tight supplies.”

In Europe, the Pan-Continental Stokes Europe 600 declined 1.1%. Hong Kong’s Hang Seng in Asia fell 1.7%. Japan’s Nikkei 225 fell 0.9% while China’s Shanghai Composite dropped 2.4%.

Write to Caitlin McCabe at [email protected] and Matt Grossman at [email protected]

Credit: www.Businesshala.com /

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