Wall Street closed sharply lower on Tuesday for the second straight session in the week. The fear of a recession gripped the market as recent economic data raised concerns that the Fed might be deterred from going slow on its policy tightening. All three major indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1% or 350.76 points to end at 33,596.34 points. Twenty-four components of the 30-stock index ended in negative territory, while six ended in the positive.
The S&P 500 lost 1.4% or 57.58 points to close at 3,941.26 points. Ten of the 11 broad sectors of the benchmark index ended in negative territory. The Communication Services Select Sector SPDR (XLC), the Energy Select Sector SPDR (XLE) and the Technology Select Sector SPDR (K) decreased 2.9%, 2.6% and 2.1%, respectively, while the Utilities Select Sector SPDR (XLU) advanced 0.6%.
The tech-heavy Nasdaq dropped 2% or 225.05 points to finish at 11,014.89 points.
The fear-gauge CBOE Volatility Index (VIX) increased 6.8% to 22.17. A total of 11 billion shares were traded on Tuesday, in line with the last 20-session average. The S&P 500 recorded three new 52-week highs and nine new lows, while the Nasdaq posted 52 new highs and 262 new lows.
Investors Weary Of Impending Recession
In the last few sessions, Wall Street has been reeling under the fear of an impending recession. The recent slew of economic data has wiped out any hope that the Fed would be taking a backseat with regard to its policy tightening, as numbers have suggested that indicators like labor market, wage growth, and the services sector, among others, have stayed strong.
Investors remain apprehensive that these numbers would push the Fed to infer that it has not done enough to dampen market demand. Under normal circumstances, robust economic indicators would be great for the market. But in the current scenario, market participants are eagerly waiting for economic indicators to show that business activity across sectors has slowed, thereby curbing inflation. Major financial houses have reflected that the stringent policy measures would induce an economic downturn in 2023.
There is a general consensus that the central bank might be raising rates by 50 basis points at its Dec 13-14 policy meeting, with rates expected to peak at 4.98% in May 2023. Growth stocks have suffered the most in the last few sessions as with a downturn looming large, they currently look overvalued. Investors are taking money out from large-cap growth and technology stocks to rush to safety.
Consequently, shares of Apple Inc.
AAPL
and Microsoft Corporation
MSFT
slid 2.5% and 2%, respectively. Both carry a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Meta Becomes a Drag On The Tech Sector
Reports have emerged that in the territories of the European Union, Meta Platforms, Inc.
META
will only be able to run advertising based on personal data with users’ consent. This has dealt a blow to the social media giant, with its stocks plunging 6.8% on the day. This follows Apple’s new privacy rules, which limit digital advertisers from tracking iPhone users.
Meta’s plunge became a major drag on the S&P 500, which closed its fourth straight losing session, and for the tech sector at large.
Economic Data
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis reported that trade deficit was $78.2 billion in October, up $4.0 billion from the revised $74.1 billion in September.
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