Wall Street’s main indexes slid on Tuesday, led by declines in Meta Platforms and other technology stocks as investors worried about a longer rate-hike cycle despite warnings of a potential recession next year.
Meta Platforms Inc (META.O) slid 6.3%, dragging down the S&P 500 (.SPX) index for the fourth-straight session, following a report that said European Union regulators have ruled the company should not require users to agree to personalized ads based on their digital activity.
All of the 11 major S&P sectors dipped in afternoon trading. Defensive sectors such as utility (.SPLRCU), often preferred during times of economic uncertainty, fared better.
Bank of America Corp’s chief executive predicted three quarters of mild negative growth next year, while JPMorgan Chase and Co’s (JPM.N) CEO Jamie Dimon said inflation will erode consumer spending power and that a mild to more pronounced recession was likely ahead.
Their comments came on the heels of recent views from BlackRock and others that believe the U.S. Federal Reserve’s aggressive monetary tightening to combat stubbornly high price rises could induce an economic downturn in 2023.
“There’s a general expectation of a contraction in the economy in the first couple of quarters and it’s going to have an impact on earnings, which is what investors are focused on,” said Hugh Johnson, chief economist of Hugh Johnson Economics in Albany, New York.
Concerns about a steep increase in borrowing costs have boosted the dollar, while weighing on equities and bond markets this year, with the S&P 500 down 17.5%.
Money market bets are pointing to a 91% chance that the U.S. central bank might raise rates by 50 basis points at its Dec. 13-14 policy meeting, with rates expected to peak at 4.98% in May 2023, up from 4.92% estimated on Monday before service-sector data was released.
The S&P 500 rallied 13.8% in October and November on hopes of smaller rate hikes and better-than-expected earnings.
“Expectation going into 2023 is that the Fed’s going to get a lot slower in the rate hikes,” said Rusty Vanneman, chief investment strategist at Orion Advisor Solutions.
“If economic growth continues to be better than what people are expecting, there are chances that the Fed would have to continue to be hawkish.”
At 12:34 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 312.69 points, or 0.92%, at 33,634.41, the S&P 500 (.SPX) was down 50.48 points, or 1.26%, at 3,948.36, and the Nasdaq Composite (.IXIC) was down 183.38 points, or 1.63%, at 11,056.56.
The bank sector index (.SPXBK) fell 2.1%, with Bank of America leading declines with a 4.9% drop.
Declining issues outnumbered advancers for a 2.53-to-1 ratio on the NYSE and a 2.30-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and eight new lows, while the Nasdaq recorded 30 new highs and 191 new lows.