Wall Street ends down for third day as growth worries weigh on tech

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  • Tech stocks down after latest Fed rate move
  • Investors are concerned about the possibility of a recession
  • Darden Restaurants falls on disappointing quarterly sales
  • JetBlue posts lowest close since March 2020
  • Indices down: Dow 0.35%, S&P 0.84%, Nasdaq 1.37%

Sept 22 (Reuters) – Wall Street’s major indexes ended lower on Thursday, falling for a third consecutive session as investors reacted to the Federal Reserve’s latest aggressive move to contain inflation by selling shares of growth, including technology companies.

The Fed raised rates by an expected 75 basis points on Wednesday and signaled a longer path for policy rates than markets had expected, stoking fears of further volatility in stock and bond trading over the course of the year. of a year that has already seen bear markets in both asset classes. Read more

The US central bank’s economic growth projections released on Wednesday were also eye-catching, with growth of just 0.2% this year, dropping to 1.2% for 2023.

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Jitters were already present in the market after a number of companies – most recently FedEx Corp and Ford Motor Co (FN) – issued gloomy earnings outlooks.

On Friday, the S&P 500’s estimated earnings growth for the third quarter was 5%, according to data from Refinitiv. Excluding the energy sector, the growth rate is -1.7%.

The S&P 500 forward price-to-earnings ratio, a common metric for valuing stocks, is 16.8 times earnings, well below the nearly 22 times forward P/E that stocks commanded at the start of the month. ‘year.

The forward PE of the index has fallen but remains above the long-term average

Nine of the 11 major S&P sectors fell, led by declines of 2.2% and 1.7%, respectively, in consumer discretionary (.SPLRCD) and financials (.SPSY) stocks.

Shares of megacap tech and growth companies such as Amazon.com Inc (AMZN.O), Tesla Inc (TSLA.O) and Nvidia Corp (NVDA.O) fell between 1% and 5.3% as Benchmark US Treasury yields hit an 11-year high.

Rising yields are particularly weighing on the valuations of companies in the technology sector, which have high expected future earnings and make up a large part of market-cap-weighted indices such as the S&P 500.

The S&P 500 tech sector (.SPLRCT) has fallen 28% so far this year, versus a 21.2% decline in the benchmark.

“If we continue to have persistent inflation and if (Fed Chairman Jerome) Powell sticks to his guns as he indicates, I think we are entering a recession and we see a significant drop in the forecast profit,” said Mike Mullaney, director of global markets in Boston. The partners.

“If that happens, I have strong belief under these conditions that we break 3,636,” he added, referring to the S&P 500’s mid-June low, its weakest point in the index. year.

The Dow Jones Industrial Average (.DJI) fell 107.1 points, or 0.35%, to 30,076.68, the S&P 500 (.SPX) lost 31.94 points, or 0.84%, to 3,757.99 and the Nasdaq Composite (.IXIC) fell 153.39 points, or 1.37%, to 11,066.81.

Major US airlines – which rebounded amid increased travel with the end of pandemic restrictions – also fell, with United Airlines (UAL.O) and American Airlines (AAL.O) down 4 .6% and 3.9% respectively. That brought losses over the past three days to 11% for United and 10.6% for American.

JetBlue Airways Corp (JBLU.O), down 7.1% and also posting a third consecutive loss, closed at its lowest level since March 2020.

Darden Restaurants Inc (DRI.N) fell 4.4% after parent company Olive Garden reported lower first-quarter sales.

Volume on U.S. exchanges was 11.39 billion shares, compared to an average of 10.91 billion for the full session over the past 20 trading days.

The S&P 500 posted a new 52-week high and 123 new lows; the Nasdaq Composite recorded 18 new highs and 699 new lows.

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Reporting by Sruthi Shankar, Medha Singh, Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Anil D’Silva and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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