Technology stocks lead broad retreat
Stocks on Wall Street gave up more ground Tuesday amid mounting worries that persistently high inflation will dim corporate profits.
The Standard & Poor’s 500 index fell 0.8%, and the Nasdaq composite dropped 2.3%. The Dow Jones industrial average eked out a 0.2% gain, thanks primarily to big gains for McDonald’s and UnitedHealth.
Big technology and communications companies helped weigh down the broader market, though some of the selling eased by late afternoon.
A stark profit warning from Snapchat’s parent company spooked investors into dumping the stocks of major social media companies. Snap plummeted 43.1%, its biggest single-day drop ever, and Facebook’s parent, Meta, slumped 7.6%. Google’s parent, Alphabet, fell 5.1%.
Technology and communications stocks, with their lofty values, tend to have an outsize influence on the market. The sectors have been responsible for much of the volatility the market has seen recently, as well as the broad decline the major indexes have experienced since early April as investors worry about the effect of rising inflation on businesses and consumers.
The pullback undercut a broad rally a day earlier, the latest example of volatile trading during the market’s swoon this year.
“Just given how much uncertainty there is, people are still having a difficult time finding that one or maybe two catalysts that give them enough confidence to take on risk assets,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
The S&P 500 fell 32.27 points to 3,941.48. The Dow gained 48.38 points to 31,928.62, and the Nasdaq slid 270.83 points to 11,264.45.
Smaller-company stocks also fell. The Russell 2000 dropped 27.94 points, or 1.6%, to 1,764.83.
The pile of concerns weighing on the market has pushed the benchmark S&P 500 to the brink of a bear market, which is when an index falls 20% from its most recent record high. It is down roughly 18% from its record high set earlier this year.
Consumers were already being squeezed by a supply-and-demand disconnect when Russia invaded Ukraine and prompted another jump in energy prices. U.S. crude oil is up about 50% this year and that has pushed gasoline prices to record highs, which is cutting into spending for many. Supply-chain problems were worsened by China’s recent lockdown in several major cities as it deals with rising COVID-19 cases.
Wall Street is also worried about the Federal Reserve’s plan to fight inflation. The central bank is raising interest rates aggressively from historic lows, but investors are concerned that it could go too far in raising rates or move too quickly. That could slow down businesses and potentially bring on a recession.
On Wednesday, investors will get a more detailed glimpse into the Fed’s decision-making process with the release of minutes from the latest policy meeting.
Bond yields declined. The yield on the 10-year Treasury fell to 2.76% from 2.86% late Monday.
Falling bond yields weighed on banks, which rely on higher yields to charge more lucrative interest on loans.