US stock indexes opened lower and the sale of technology stocks deepened, exacerbated by growing fears of investors about the prospects for economic growth.
The S&P 500 fell 1.0% on Tuesday, while the Dow Jones Industrial Average lost 0.5%. Contracts for the technology Nasdaq Composite fell 1.8 percent.
Losses showed a sharp reversal since Monday, when major US indexes rose after an unstable trading session the previous week. But a warning of profits and earnings later Monday from social media company Snap again dampened investor sentiment. Asian indices generally fell amid declining technology stocks. European markets also traded lower.
Shares of Snap fell 34% before the market on Tuesday, after investors learned the comments that the macroeconomic environment has deteriorated more than expected. Concerns about disruptions in Snap’s advertising revenue have grown into other technology stocks that have been battered this year. Meta Platforms fell 8.1% before the start, and Alphabet, Google’s parent, fell 4.4%.
Investors are facing a number of signals as they try to chart the trajectory of the US economy. Many worry that the Federal Reserve’s plans to tighten inflation could drive the economy into recession.
Disappointing profits and warnings in the corporate landscape have exacerbated these fears. Abercrombie & Fitch became the last retailer on Tuesday to hurt investor sentiment after turning a loss for the first quarter amid higher spending. The company’s shares fell 31% before the market.
Concerns about slowing growth amid higher inflation were among the catalysts that caused the S&P 500 to fall 17% by Monday from its highest level in January. Investors are now keeping a close eye on whether the S&P 500 is entering a bear market, defined as a drop of at least 20% from the recent peak. On Friday, the benchmark was close to the end of the bear market, although it was saved by a rally at the end of the session.
However, there were flashes of optimism, such as on Monday, when JPMorgan Chase said US consumers seemed to be in good financial health. But that sanguine image was quickly balanced by the revelation of information from Snap, a company that has never issued a revenue warning before.
“We will have this train ride for a while as investors stick to more optimistic data points and get new frustrations when another sad read comes along,” said Susanna Streetter, senior investment and market analyst at Hargreaves Lansdown. . “We still don’t know the full path to raising interest rates or how resilient consumers will be.
Despite the widespread sale of technology before the market on Tuesday, there were bright spots in the market. Zoom Video Communications rose 4.9 percent before the bell rang after the video conferencing company raised its earnings forecast.
Later Tuesday, Fed Chairman Jerome Powell will give notes at an economic summit in Las Vegas. Investors will look for new clues about its prospects for inflation, the economy and the way to raise interest rates.
Several economic data are also expected on Tuesday, including data on new home sales in the United States and measurements of manufacturing activity in the United States. Earlier on Tuesday, data firm S&P Global said its index of purchasing managers for the eurozone’s services and manufacturing sectors fell in May from a month earlier. Factories in Europe and Japan have announced a weakening of new orders amid higher costs and prices, a sign that production will slow further in the coming months.
The sell-off of technology stocks on Tuesday during the pre-market session prompted investors to grab government bonds, with yields on benchmark 10-year US government bonds falling to 2.819%, from 2.857% on Monday. Yields fall when bond prices rise.
Gold, considered another asylum asset, rose 0.3 percent to $ 1,853.70 an ounce.
On Monday, traders worked on the floor of the New York Stock Exchange.
Photo: Spencer Platt / Getty Images
Brent crude oil, international oil, rose 0.2 percent to $ 113.66 a barrel, reversing losses earlier in the session.
“You have this push and pull with oil prices – oil prices are staying somewhat lower than global growth, which is not a big indicator of the health of the global economy,” said Ms Street. “But at the same time, it is no longer declining due to concerns about limited supplies.”
In Europe, the pan-continental Stoxx Europe 600 lost 0.6%. In Asia, Hong Kong’s Hang Seng fell 1.7%. Japan’s Nikkei 225 lost 0.9 percent, while China’s Shanghai Composite fell 2.4 percent.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
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