Stocks slide again on inflation concerns
Stocks closed broadly lower on Wall Street on Tuesday, after a discouraging snapshot of U.S. consumer confidence stoked investors’ worries about the risk that sharply higher interest rates and pervasive inflation could trigger a recession.
The S&P 500 ended 2 percent lower, reversing a 1.2 percent gain from earlier in the day. The Dow Jones Industrial Average fell 1.6 percent and the Nasdaq composite ended 3 percent lower.
Roughly 85 percent of the stocks in the benchmark S&P 500 closed in the red. Technology, communications and health care stocks accounted for a big share of the decline. Retailers and other companies that rely on direct consumer spending also helped pull the index lower.
Energy stocks, the only sector to notch gains this year, rose as crude oil prices headed higher.
The indexes got off to a solid start, but the gains faded by midday after the Conference Board reported that its consumer confidence index fell in June to its lowest level in more than a year.
The decline was driven largely by concerns over inflation, including prices for gas and food. The results were much weaker than economists expected.
“Confidence is going to continue to shrink as long as inflation remains high,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It all comes back to inflation, it’s ultimately driving reaction from the Fed and impacting the market and consumer confidence.”
The S&P 500 fell 78.56 points to 3,821.55, while the Dow dropped 491.27 points to 30,946.99. The tech-heavy Nasdaq slid 343.01 points to 11,181.54.
Smaller company stocks also fell. The Russell 2000 gave up 32.90 points, or 1.9 percent, at 1,738.84. The indexes are all on pace to for losses of 6 percent or more in June.
Investors face a pervasive list of concerns centering around rising inflation squeezing businesses and consumers. Supply chain problems that have been at the root of rising inflation were made worse over the last several months by increased restrictions in China related to COVID-19.
Stubborn inflation pressures have driven a stark shift in policy from central banks, which are raising rates to try and temper inflation after years of holding rates down to help economic growth. Now, they are trying to slow economic growth, but investors are worried they could go too far and actually push the economy into a recession as key economic indicators are already showing a slowdown in things like retail sales.
“The market might be getting spooked by the speed with which consumers are losing confidence, and that it could possibly upend a soft landing” for the economy, said Sam Stovall, chief investment strategist at CFRA.