Wall Street dragged by recession fears, S&P on track for 4th cut

Wall Street dragged by recession fears, S&P on track for 4th cut

  • Meta stumbles upon EU concern report over targeted ads
  • Energy stocks fall as crude trades at lowest level since January
  • Indices down: Dow 1.39%, S&P 1.78%, Nasdaq 2.22%

Dec 6 (Reuters) – Wall Street benchmarks fell again on Tuesday, with the S&P 500 on track for a fourth consecutive decline, amid uncertainty around the direction of Federal Reserve rate hikes and fresh talk of a looming recession weighed on nervous investors.

Among the biggest drags on the S&P was Meta Platforms Inc (META.O), which fell 6.6% on reports that European Union regulators ruled the company shouldn’t require users to accept personalized advertisements based on their digital activity.

However, all of the 11 major S&P sectors were down by early afternoon, with energy and communication services (.SPLRCL) joining the technology sector (.SPLRCT) as the main laggards. Defensive sectors such as utilities (.SPLRCU), often favored in times of economic uncertainty, fared better.

Prospects for future economic growth were front and center on Tuesday after comments from financial titans pointing to uncertain times ahead.

Bank of America Corp chief executive predicted three quarters of slightly negative growth next year, while JPMorgan Chase and Co (JPM.N) CEO Jamie Dimon said inflation would erode the power of consumer buying and that a mild to more severe recession was likely to come.

Their comments follow recent views from BlackRock and others who believe aggressive monetary tightening by the US Federal Reserve to combat stubbornly high price increases could induce an economic slowdown in 2023.

“The economy is generally expected to contract in the first two quarters and that will impact earnings, which is what investors are focusing on,” said Hugh Johnson, chief economist at Hugh Johnson Economics at Albany, New York. York.

Banks are among the most sensitive stocks to an economic downturn, as they potentially face the negative effects of bad debt or slowing loan growth. The S&P Banks Index (.SPXBK) fell 2.6%, with Bank of America leading the declines with a drop of 5.6%.

Fears over economic growth come amid a reassessment by traders of the path future interest rate hikes will take, following strong employment and service sector data in recent days.

Money market bets indicate a 91% chance that the US central bank will raise rates by 50 basis points at its December 13-14 policy meeting, with rates expected to peak at 4.98% in May 2023 , compared to 4.92% estimated on Monday before the release of the services sector data.

The S&P 500 rose 13.8% in October and November on hopes of lower rate hikes and better-than-expected earnings, although expectations of slower rate hikes could be undermined by new data releases , including producer prices to be released on Friday.

“If economic growth continues to be better than people expect, chances are the Fed needs to continue to be hawkish,” said Rusty Vanneman, chief investment strategist at Orion Advisor Solutions.

As of 2:21 p.m. ET (1921 GMT), the Dow Jones Industrial Average (.DJI) fell 472.5 points, or 1.39%, to 33,474.6, the S&P 500 (.SPX) was down 71, 19 points, or 1.78%, to 3,927.65 and the Nasdaq Composite (.IXIC) lost 249.91 points, or 2.22%, to 10,990.03.

Nervousness over the direction of global growth also weighed on oil prices, with U.S. crude slipping to levels last seen in January, before Russia’s invasion of Ukraine disrupted supply markets. . The energy sector (.SPNY) fell 2.6% on Tuesday.

Elsewhere, Mirati Therapeutics Inc (MRTX.O) fell 21.1% – on track for its biggest daily decline since March 2020 – after the company reported disappointing data from early trials of its experimental drug against cancer, adagrasib.

Textron Inc (TXT.N) climbed 4.9% after the US military awarded the contract for its next-generation helicopter to the company’s Bell unit.

Reporting by Devik Jain, Ankika Biswas and Johann M Cherian in Bengaluru and David French in New York; Editing by Vinay Dwivedi, Shounak Dasgupta and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

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