Home / Markets / Stock Markets /  Wall Street tumbles on growing concerns over economic growth; S&P 500 dips 2%

Stocks are dropping in early trading on Wall Street as fresh data painted a picture of an economy that can handle further US Federal Reserve tightening, and concern about the global economy overshadowed the Bank of England’s move to restore calm.

The S&P 500 fell as much as 2.4% and on pace for its seventh drop in the last eight days after St Louis Fed President James Bullard didn’t back down from his hawkish stance and said investors have now understood that they can’t escape additional rate hikes in coming months.

Better-than-expected 2Q core PCE and personal consumption numbers today also paved the path for the central bank to stay aggressive. Weekly jobless claims fell to the lowest since April, showing a persistently tight labor market. 

At 9:59 am ET, the Dow Jones Industrial Average was down 469.62 points, or 1.58%, at 29,214.12, the S&P 500 was down 73.40 points, or 1.97%, at 3,645.64.

The Nasdaq fell over 1% due to losses in megacap growth names such as Amazon.com, Apple, Microsoft, Meta Platforms and Tesla. They were down between 2.41% and 4.12%.

Wall Street's main indexes recorded hefty declines in the first hour of trading, poised to wipe out almost all of the previous session's gains.

Thursday's economic reports

A better-than-expected government report on US layoffs only bolstered expectations that the Fed will keep hiking interest rates and investors are worried that it could hit the brakes on the economy too hard and cause a recession.

The US economy has already contracted for two consecutive quarters, which is one informal measure of a recession. But, the employment market remains strong and consumers continue spending.

That has helped bolster the economy and is making it more difficult to get inflation under control.

US Treasuries

US Treasuries trimmed Wednesday’s gains, with the 10-year yield climbing to around 3.79%. UK gilt yields rose after Prime Minister Liz Truss’s defense of unfunded tax cuts that sent markets into turmoil failed to persuade investors. 

Investors are contending with threats posed by discordant moves from central banks over the past few days, with Fed officials adamant on further monetary tightening, the BOE unveiling a plan to support government debt and authorities in Asia trying to prop up weakening currencies.

For markets to stabilise, “investors will need to see convincing evidence that inflation is coming under control, allowing central banks to become less hawkish," said Mark Haefele, chief investment officer at UBS Global Wealth Management. “This turn, in our view, is still some time away."

 

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