- Meta crashes on report of EU concerns over targeted advertising
- Energy stocks fall as crude oil trades at lowest levels since January
- Indexes down: Dow 1.39%, S&P 1.78%, Nasdaq 2.22%
Dec 6 (Portal) – Wall Street benchmarks plunged again on Tuesday, with the S&P 500 on course for a fourth straight decline amid uncertainty over the direction of Federal Reserve rate hikes and further rumors of a threatened recession weighed on shy investors.
Among the top detractors from the S&P was Meta Platforms Inc (META.O), which fell 6.6% after reports reported that European Union regulators have decided that the company should not require users to view personalized ads consent based on their digital activities.
However, all 11 major S&P sectors were lower in early afternoon trading, with energy and communications services (.SPLRCL) joining the technology sector (.SPLRCT) as leading laggards. Defensive sectors like Utilities (.SPLRCU), which are often favored in times of economic uncertainty, performed better.
Future economic growth prospects took center stage on Tuesday after comments from financial titans pointed to uncertain times.
The chief executive of Bank of America Corp forecast three quarters of slightly negative growth for next year, while Jamie Dimon, CEO of JPMorgan Chase and Co (JPM.N), said inflation will erode consumer spending power and that a slight until a more pronounced recession is likely to be imminent.
Her comments followed recent views from BlackRock and others who believe the Federal Reserve’s aggressive monetary tightening to combat stubbornly high inflation could trigger an economic downturn in 2023.
“The general expectation is that the economy will contract in the first few quarters and impact earnings, which is what investors are focused on,” said Hugh Johnson, chief economist at Hugh Johnson Economics in Albany, New York.
Banks are among the most sensitive stocks to an economic downturn, as they may face the negative impact of bad loans or slowing credit growth. The S&P Banking Index (.SPXBK) was down 2.6%, led by Bank of America, down 5.6%.
Fears over economic growth come as traders reassess the trajectory of future rate hikes following strong jobs and services data in recent days.
Money market bets point to a 91% chance that the US Federal Reserve could hike rates by 50 basis points at its December 13-14 monetary policy meeting, with rates expected to hit 4.98% in May 2023 peak, down from an estimated 4.92% Monday ahead of the release of services data.
The S&P 500 rose 13.8% in October and November on hopes of weaker rate hikes and better-than-expected earnings, although expectations of slower rate hikes could be undermined by more data releases, including producer prices due Friday.
“If economic growth continues to be better than expected, there’s a chance the Fed will need to remain hawkish,” said Rusty Vanneman, chief investment strategist at Orion Advisor Solutions.
At 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) lost 71.19 points or 1, 78% to 3,927.65 and the Nasdaq Composite (.IXIC) fell 249.91 points, or 2.22%, to 10,990.03.
Tremors over the direction of global growth have also weighed on oil prices, with US 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) tumbled 21.1% — on course for its biggest daily decline since March 2020 — after the company reported disappointing early trial data on its investigational cancer drug adagrasib.
Textron Inc (TXT.N) rose 4.9% after the US Army 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; Edited by Vinay Dwivedi, Shounak Dasgupta and Lisa Shumaker
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