Key Wall Street indices fell on Thursday, with rising stocks leading the fall for a second consecutive session as investors worried that aggressive interest rate hikes in decades of high inflation control could lead the economy to a recession.
MegaCap stocks fell between 2% and 5.9% on Meta Platform, Microsoft Corp., Google-owned Alphabet Inc., Apple Inc., Amazon.com and Tesla Inc.
Ten of the 11 major S&P sectors declined in morning trade. Technology and consumer discretionary stocks fell 1.2% and 2.4%, respectively.
Tech-heavy Nasdaq fell more than 3% on Wednesday, after data showed that U.S. consumer prices were restrained in April but could remain hot for some time and put the Federal Reserve on foot breaks to keep demand cool.
A report from the Department of Labor on Thursday found that the producer price index (PPI) for final demand rose 0.5% in April, in line with expectations, compared to a 1.6% increase in March.
“What we are seeing is that inflation has started to decline but the momentum has not been as fast as people had hoped. So I think the markets are still scared of it,” said Jean Goldman, chief investment officer at Cetera Investment Management.
“There’s really a lot of uncertainty around the Fed right now. If they’re too aggressive, it hurts economic growth, but (if) they’re too conservative, it hurts high inflation, which hurts growth.”
Growth stocks, which led to Wall Street rally from epidemic lows in 2020, have pushed sales this year as their returns and valuations are discounted more deeply when rates rise.
The S&P 500 Growth Index .IGX has fallen 26.8% so far this year, a much larger fall than the 9.1% decline in its value.
Traders are setting prices within a 61% chance of a 75 basis point increase by the Fed in June.
At 10:02 am ET, the Dow Jones Industrial Average .DJI was down 294.57 points, or 0.93%, at 31,539.54, the S&P 500. 193.70 points or 1.70% lower at 11,170.53.
Among other stocks, the entertainment giant’s second-quarter earnings and profits fell short of estimates after the Walt Disney Co. DISN fell 3.9% and warned that disrupting the supply chain and increasing wages could put financial pressure.
Plant-based protein maker Beyond Meat Inc fell as much as 1% after falling below the IPO price of $ 25 at opening hours as a BYND.O quarterly loss balloon.
Tapestry TPR.N has risen 10.6% after the owner of Kate Spade said it is confident that demand for its luxury bags and clothing in China will recover when the core growth market lifts the COVID-19 barrier.
The 2.67-to-1 ratio on the NYSE and the 1.96-to-1 ratio on the Nasdaq have outperformed the declining numbers.
The S&P index hit a new 52-week high and 72 new lows, while Nasdaq hit four new highs and 1,243 new lows.