- US factory orders rose more than expected in May
- Commodity-related stocks, bank stocks tumble
- Indexes fall: Dow 1.59%, S&P 1.20%, Nasdaq up 0.09%
July 5 (Reuters) – The S&P 500 and Dow fell on Tuesday as investors worried about the possibility of a recession as central banks around the world took aggressive action to stem a surge in inflation.
U.S. stocks have come under sustained selling pressure this year, with the benchmark S&P 500 (.SPX) posting its steepest first-half percentage drop since 1970 as the Federal Reserve moves away from easy money policy by raising borrowing costs.
Investors are now awaiting minutes from the Fed’s June meeting on Wednesday as they brace for another 75 basis point interest rate hike at the end of the month.
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Traders are also watching economic data, including a U.S. payrolls report expected on Friday and company comments on signs of peak inflation and cooling economic growth as regular trading resumed after a long weekend and earnings season is around the corner.
“Recession concerns are dominating the market,” said Sam Stovall, chief investment strategist at CFRA.
“The real question is, if the economy slows, then how much will second quarter earnings or guidance disappoint?” People are waiting to get some news that could act as a catalyst.”
Data showed new orders for U.S.-made goods rose more than expected in May, showing demand for products remains strong even as the Fed seeks to cool the economy. Read more
Separately, business growth in the eurozone slowed further in June and natural gas prices in Europe rose again, renewing fears of a recession in the bloc. Read more
“Earnings forecasts were artificially held back. Over the next two weeks, everyone will start to downgrade and we expect to see significant volatility,” said Dan Genter, CEO of Genter Capital Management.
Benchmark U.S. Treasury yields fell on Tuesday and a key part of the yield curve inverted for the first time in three weeks as concerns about economic growth dampened risk appetite and increased demand for safe-haven U.S. debt.
Bank stocks, which are sensitive to the economic outlook, fell. The S&P 500 banks index (.SPXBK) fell 2.1%, more than the financial sector’s (.SPSY) decline of 1.9%.
Energy stocks (.SPNY) hit five-month lows as recession fears clouded the outlook for oil demand. The materials sector ( .SPLRCM ) was at a near 1-1/5-year low as a drop in metal prices weighed on mining stocks.
At 12:23 p.m. ET, the Dow Jones Industrial Average (.DJI) fell 492.96 points, or 1.59%, to 30,604.30, the S&P 500 (.SPX) fell 45.90 points, or 1 .20%, to 3779.43.
The Nasdaq Composite (.IXIC) rose 10.47 points, or 0.09%, to 11,138.31, paring early losses.
Shares in Warner Bros Discovery Inc ( WBD.O ) fell 1.5 percent after reports that the media and streaming firm’s unit, HBO Max, is halting production of original shows in Europe.
Declining issues outnumbered advancing ones by a ratio of 2.97 to 1 on the NYSE and 1.31 to 1 on the Nasdaq.
The S&P recorded one new 52-week high and 51 new lows, while the Nasdaq recorded 10 new highs and 280 new lows.
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Reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru; Editing by Anil D’Silva and Shunak Dasgupta
Our standards: The Thomson Reuters Trust Principles.
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