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Wall Street ends down on day three as growth concerns weigh on tech

Wall Street ends down on day three as growth concerns weigh on tech
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  • Tech stocks have fallen after the Fed’s latest rate hike
  • Investors are worried about the possibility of a recession
  • Darden restaurants fall on weak quarterly sales
  • JetBlue records lowest closing price since March 2020
  • Indices down: Dow 0.35%, S&P 0.84%, Nasdaq 1.37%

September 22 (Reuters) – Major Wall Street indices closed lower on Thursday, falling for the third straight month as investors braced for the Federal Reserve’s recent aggressive move to curb inflation by selling growth stocks, including technology companies. reacted.

The Fed hiked rates by an estimated 75 basis points on Wednesday, signaling a longer interest rate path than markets had priced in, raising fears of further volatility in stocks and bonds in a year that has already seen bear markets in both asset classes. Continue reading

Also striking were the Fed’s economic growth forecasts released on Wednesday, with growth of just 0.2% this year and rising to 1.2% for 2023.

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Jitters was already present in the market after a number of companies – most recently FedEx Corp and Ford Motor Co (FN) – issued gloomy earnings prospects.

As of Friday, the estimated S&P 500 earnings growth for the third quarter is 5%, according to Refinitiv data. Excluding the energy sector, the growth rate is -1.7%.

The S&P 500’s forward price-to-earnings ratio, a common metric used to value stocks, is 16.8 times earnings — well below the nearly 22 times forward P/E the stocks posted earlier in the year.

The forward PE for the index has fallen but is still above the long-term average

Nine of the 11 major S&P sectors fell, led by falls of 2.2% and 1.7% in consumer discretionary respectively (.SPLRCD) and financially (.SPSY) Stocks.

Shares of megacap technology and growth companies like Amazon.com Inc (AMZN.O)Tesla Inc (TSLA.O) and Nvidia Corp (NVDA.O) fell between 1% and 5.3% as benchmark US Treasury yields hit an 11-year high.

Rising yields are particularly weighing on the valuations of companies in the technology sector, which have high expected future earnings and make up a significant portion of market-cap weighted indices like the S&P 500.

The technology sector of the S&P 500 (.SPLRCT) is down 28% so far this year, compared to a 21.2% decline in the benchmark index.

“If we continue to have sticky inflation and if (Fed Chair Jerome) Powell sticks to his guns like he’s suggesting, I think we’re going into a recession and we’re going to see a significant drop in earnings expectations,” said Mike Mullaney, Director of Global Markets in Boston Partners.

“If that happens, I have a strong belief that under these conditions we will break 3,636,” he added, referring to the S&P 500’s mid-June low, the weakest point of the year.

The Dow Jones Industrial Average (.DJI) fell 107.1 points, or 0.35%, to 30,076.68, the S&P 500 (.SPX) lost 31.94 points, or 0.84%, to 3,757.99 and the Nasdaq Composite (.IXIC) fell 153.39 points, or 1.37%, to 11,066.81.

Major U.S. carriers, which have rebounded amid increased travel after pandemic restrictions ended, were also down with United Airlines (UAL.O) and American Airlines (AAL.O) Decrease of 4.6% and 3.9% respectively. This put United’s 11% and American’s losses over the last three days at 10.6%.

JetBlue Airways Corp (JBLU.O)fell 7.1% and also posted a third straight loss, closing at its lowest level since March 2020.

Darden Restaurants Inc (DRI.N) slipped 4.4% after Olive Garden’s parent company reported weak first-quarter sales.

Volume on US exchanges was 11.39 billion shares compared to the average of 10.91 billion for the entire session over the last 20 trading days.

The S&P 500 posted a new 52-week high and 123 new lows; the Nasdaq Composite posted 18 new highs and 699 new lows.

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Reporting by Sruthi Shankar, Medha Singh, Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Edited by Shounak Dasgupta, Anil D’Silva and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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