NEW YORK - The S&P 500 and Nasdaq ended in the red on Tuesday on concerns that aggressive measures to control decades of high inflation could push the US economy into recession, reducing investor appetite for risk.
As the three major U.S. stock indices reduced their losses in the afternoon trade, the blue-chip Dow has turned positive. Nevertheless, since the S&P 500 reached its all-time high on January 3, it has settled on percentage points to ensure it is in a bear market.
"When we lag behind and acknowledge the primary market catalysts, it's really about the Fed pivot and the change in interest rates that have affected prices across the capital market," said Bill North, senior investment director at US Bank Wealth Management in Helena.
"Over the past two weeks, we've seen some levels of macroeconomic decline begin to manifest themselves in corporate earnings and economic releases."
Most of the sell-offs were driven by a profit warning from Snap Inc., which saw the company's shares decline and spread contagiously across the social media segment.
Meta Platforms Inc, Alphabet Inc, Twitter Inc and Pinterest Inc all ended the session lower, as did the broader S&P 500 Communications Services sector.
Russia's war with Ukraine and China's restrictive measures to control its latest COVID-19 outbreak have disrupted global supply chains, sending inflation to decades-old highs.
The US Federal Reserve has pledged to aggressively address rising inflation by aggressively raising borrowing costs, and the minutes of its most recent monetary policy meeting, expected on Wednesday, will be parsed by market participants for information on the pace and scope of that activity.
Investors are now expecting a series of 50-basis-point rate hikes over the next few months, fueling fears that the central bank could push the economy into recession, a scenario that is being backed by growing analyst estimates.
"Tomorrow we will look at the FOMC minutes to see if the monetary policy outlook for any of the signs could be more gruesome or naughty than what was set out at the last meeting," said North of US Bank Wealth Management.
Data released on Tuesday paints a picture of slowing economic growth, new home sales sinking and declining business activity.
In Frankfurt, Fed Chair Jerome Powell's opponent, Christine Lagarde, president of the European Central Bank, said he expects the ECB deposit rate to increase by at least 50 basis points by the end of September.
Unofficially, the Dow Jones Industrial Average rose 50.82 points, or 0.16%, to 31,931.06, the S&P 500 lost 31.54 points, or 0.79%, to 3,942.21, and the Nasdaq Composite fell 50.82 points, or 0.16%, to 8215% or 8231.5%.
Clothing retailer Abercrombie & Fitch Co crashed after posting a surprising quarterly loss and cutting its annual sales and margin outlook.
Beloved home-based Zoom Video Communications Inc. has jumped after year-over-year profit forecast growth due to demand from the enterprise. (Reporting by Stephen Kalp; Additional reporting by Devik Jain and Anisha Sirkar in Bangalore; Editing by Jonathan Otis)