S&P 500, Dow slip as recession fears mount

  • US May factory orders rise more-than-expected
  • Commodity-linked stocks, bank stocks plummet
  • Indexes down: Dow 1.59%, S&P 1.20%, Nasdaq up 0.09%

July 5 (Reuters) – The S&P 500 and Dow fell on Tuesday, and investors worried about the possibility of a recession as central banks around the world take aggressive action to stem a rise in inflation.

US stocks have been under unrelenting selling pressure this year, with the benchmark S&P 500 index (.SPX) posting its steepest first-half percentage decline since 1970 as the Federal Reserve backs away from easy money by raising borrowing costs.

Investors are now awaiting the minutes of Wednesday’s June Fed meeting as they brace for another 75 basis point rate hike later in the month.

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Traders are also watching economic data, including a US payroll report expected on Friday, and company comments for signs of inflation spike and slowing economic growth as regular trading kicked off after a long weekend and with earnings season just around the corner.

“Recession concerns are dominating the market,” said Sam Stovall, CFRA’s chief investment strategist.

“The real question is if the economy slows down, by how much will second quarter earnings or guidance disappoint. People wait until they get news that could serve as a catalyst.”

Data showed that new orders for US-made goods rose more-than-expected in May, showing demand for products remains strong even as the Fed tries to cool the economy. Continue reading

Separately, business growth continued to slow across the eurozone in June and European natural gas prices rose again, reviving fears of an EU recession. Continue reading

“Profit forecasts have been artificially inflated. Over the next two weeks everyone will start lowering estimates and we expect significant volatility,” said Dan Genter, Chief Executive of Genter Capital Management.

Benchmark US Treasury yields fell on Tuesday and a key part of the yield curve inverted for the first time in three weeks as economic growth affected reduced risk appetite and increased safe-haven demand for US debt.

Bank stocks, sensitive to the economic outlook, plummeted. The S&P 500 banking index (.SPXBK) fell 2.1%, more than the 1.9% decline in the financial sector (.SPSY).

Energy stocks (.SPNY) hit a five-month low as recession fears clouded the oil demand outlook. The commodities sector (.SPLRCM) was at a near 1-1/5 year low as a collapse in metal prices hit mining stocks.

At 12:23 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 492.96 points, or 1.59%, to 30,604.30, the S&P 500 (.SPX) was down 45.90 points, or 1.20% 3,779.43.

The Nasdaq Composite (.IXIC) was up 10.47 points, or 0.09%, to 11,138.31, erasing early losses.

Shares of Warner Bros Discovery Inc (WBD.O) fell 1.5% after media and streaming company HBO Max’s unit reported it was halting production of original shows in Europe.

At a 2.97-to-1 ratio on the NYSE and a 1.31-to-1 ratio on the Nasdaq, declining issues outweighed the movers.

The S&P index posted a new 52-week high and 51 new lows, while the Nasdaq posted 10 new highs and 280 new lows.

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Reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru; Edited by Anil D’Silva and Shounak Dasgupta

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