The Dow ends its worst day in three months, falling more than 700 points as recession fears mount

Stocks fell sharply on Thursday after new data showed retail sales fell more-than-expected in November, stoking fears that the US Federal Reserve’s unrelenting rate hikes could plunge the economy into recession.

The Dow Jones Industrial Average fell 764.13 points, or 2.25%, to 33,202.22 — on its worst day since September, when hopes of a year-end rally faded. The S&P 500 fell 2.49% to 3,895.75, bringing its decline for December to about 4.5%. The Nasdaq Composite plunged 3.23% to 10,810.53 as the battered tech-heavy index extended its losses to nearly 31% in 2022.

The sell-off was broad-based as only 14 stocks in the S&P 500 traded in positive territory. Mega-cap tech stocks fell, with shares of Apple and alphabet by more than 4% while Amazon and Microsoft were more than 3% lower. shares of Netflix fell 8.6% after a Digiday report said the streaming company was offering to give advertisers money back after missing viewership targets.

Disappointing retail sales indicated that inflation is weighing on consumers. Retail sales fell 0.6% in November, according to the Commerce Department. That was a bigger loss than the Dow Jones estimate of a 0.3% decline.

The selling started on Wednesday following the Fed’s recent hike in the federal funds rate. The central bank also said it would keep raising interest rates into 2023 and forecast the fed funds rate to hit a higher-than-expected 5.1%. With the half a percentage point hike on Wednesday, the target range for rates currently stands at 4.25% to 4.5%, the highest level in 15 years.

“The stock market reaction is now factoring in a recession and dismissing the possibility of a ‘soft/soft’ landing recently mentioned by Powell at the [Brookings Institution]’ wrote Quincy Krosby, chief global strategist at LPL Financial, on Thursday.

“The tug-of-war between the Fed and markets is clearly on the markets’ side: the slowdown is not ‘temporary’ and the Fed will be forced to act before 2024,” Krosby added.

The Dow closed below 34,000 on Wednesday and then selling strengthened on Thursday after the poor retail sales data. Treasury yields continued to buck the Fed, falling on fears the central bank is going too far. The 10-year yield fell below 3.5%.

Bank stocks also fell as fears of a recession mounted. JPMorgan Chase around 2.5% lost.