Wall Street closed lower for a third day as growth concerns weighed on technology

(Reuters) – Wall Street’s main indexes closed lower on Thursday, falling for a third consecutive session as investors reacted to the Federal Reserve’s latest aggressive move to curb inflation by selling growth stocks, including technology companies.

The Federal Reserve raised interest rates by an expected 75 basis points on Wednesday and signaled a longer trajectory for policy rates than markets had otherwise tapped into, raising fears of more volatility in stock and bond trading in a year that has already seen bear markets in both asset classes. Read more

The US central bank’s economic growth forecast released on Wednesday was also striking, with growth of just 0.2% this year, rising to 1.2% for 2023.

Tensions were already in the market after a number of companies – most recently FedEx Corp and Ford Motor Co (FN) – Awesome prospects for earnings released.

As of Friday, the S&P 500’s estimated earnings growth for the third quarter is 5%, according to Refinitiv data. Excluding the energy sector, the growth rate was -1.7%.

The forward price-to-earnings ratio for the S&P 500, a common metric for valuing stocks, is 16.8 times earnings — well below the nearly 22 times forward price-to-earnings gains ordered by stocks at the start of the year.

Nine of the S&P’s 11 major sectors fell, led by declines of 2.2% and 1.7%, respectively, according to a consumer estimate. (.SPLRCD) and financial (.SPSY) Stores.

Shares in huge and growth tech companies like Amazon.com Inc (AMZN.O)Tesla Inc (TSLA.O) And Nvidia Inc (NVDA.O) They fell between 1% and 5.3% as US Treasury yields reached an 11-year high.

Increasing returns particularly affect the valuations of companies in the technology sector, which have high projected future earnings and make up a large portion of market capitalization-weighted indices such as the S&P 500.

Technology S&P 500 (.SPLRCT) It is down 28% so far this year, compared to a 21.2% drop in the benchmark.

“If steady inflation continues, and if (Federal Reserve Chairman Jerome) Powell sticks to his guns as he points out, I think we are entering a recession and we see a significant dip in earnings expectations,” said Mike Mulaney, director of global markets in Boston. partners.

“If this happened, I have a great conviction under the circumstances that we would have broken 3636,” he added, referring to the S&P 500’s low in mid-June, its weakest point this year.

Dow Jones Industrial Average (.DJI) The Standard & Poor’s 500 Index fell 107.1 points, or 0.35%, to 30,076.68 (.SPX) It lost 31.94 points, or 0.84%, to 3757.99 points and the Nasdaq Composite (nineteenth) It fell 153.39 points, or 1.37%, to 11,066.81 points.

Major US airlines – which have enjoyed a rebound amid increased travel as pandemic restrictions end – have also fallen behind with United Airlines. (UAL.O) and American Airlines (AAL.O) It decreased by 4.6% and 3.9%, respectively. These losses have increased in the past three days to 11% for United and 10.6% for the Americans.

JetBlue Airways Corporation (JBLU.O)down 7.1%, also recording a third loss in a row, to close at its lowest level since March 2020.

Darden Restaurants Company (DRI.N) It fell 4.4% after parent company Olive Garden reported downbeat sales in the first quarter.

Volume on US exchanges was 11.39 billion shares, compared to an average of 10.91 billion for the full session over the last 20 trading days.

The S&P 500 hit a new 52-week high and 123 new low; The Nasdaq recorded 18 new highs and 699 new lows.

Additional reporting by Sruthi Shankar, Medha Singh and Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shunak Dasgupta, Anil de Silva and Deepa Babington

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