Wall Street stocks tumbled Thursday as a round of upbeat economic data fueled expectations that the Federal Reserve will continue to aggressively raise borrowing costs to fight inflation.
The somber mood was further deepened by weak earnings reports, including from chipmaker Micron Technology, which announced plans to cut 10 percent of its workforce amid weaker demand, while used-car dealer CarMax said it was halting buybacks and cutting costs after a four-month slump Fifth in third-quarter net income.
The S&P 500 closed 1.4 percent lower after previously falling nearly 3 percent. The tech-heavy Nasdaq Composite Index slipped 2.2 percent. The S&P 500 is down a fifth this year, leaving Wall Street’s blue-chip benchmark on track for its worst year since the 2008 financial crisis, according to Refinitiv data.
Thinner trading conditions late in the year were also a factor in the sharp declines as the holiday season approached.
“Right now nobody wants to take risks, everyone is just trying to finish the year,” said Jim Tierney, chief investment officer for US growth at fund manager AllianceBernstein.
He added, “The big issue in 2023 is going to be that the Fed has done its thing now, what does that mean for earnings growth?”
Micron’s news sent a number of semiconductor-related stocks, including Nvidia, down 7 percent. Elsewhere, Tesla was another big loser, down 8.9 percent after it was revealed the automaker had increased the discount it was offering on some models. That raised fears that it, too, was faced with flagging demand.
Ahead of the market open, third-quarter US gross domestic product growth was unexpectedly revised to an annualized rate of 3.2 percent, from 2.9 percent in November. The number of weekly initial jobless claims was also lower than expected at 216,000, below the 222,000 forecast by economists.
The upward revision “[confirmed] the Fed’s claim that the real economy is strong enough to endure tight monetary policy for an extended period of time,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets.
Wall Street’s declines earlier in the session hit European stocks, which had previously oscillated between small losses and gains. The Stoxx Europe 600 fell 1 percent, while Britain’s FTSE 100 gave up earlier gains to trade 0.4 percent lower. Earlier, the MSCI Asia Pacific was up 0.8 percent, regaining some balance after the Bank of Japan’s shock decision on Tuesday to ease its policy of fixing bond yields near zero.
Signs of US economic strength also dampened appetite for interest-sensitive short-dated government bonds. The two-year Treasury yield edged up to 4.28 percent.
Longer-dated government debt remained stable after being shaken by the BoJ’s surprise move. The US 10-year Treasury yield was roughly flat at 3.69 percent, while euro-zone and UK yields rose slightly.
In currency markets, the pound fell after data showed the UK economy contracted a more-than-expected 0.3 percent in the third quarter from the previous three-month period. Sterling was traded 0.4 percent lower against the dollar at $1.203.
The numbers suggested the expected downturn in the UK economy could materialize sooner than expected, said Investec economist Ellie Henderson.
“The question now is whether the economy will be able to survive the growth [the fourth quarter] and avoid a recession at the end of the year,” she said.
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