Wall Street tumbles on rate, recession worries, bleak chipmaker outlook

Dec 22 (Reuters) – Wall Street’s major averages closed lower on Thursday with the technology-heavy Nasdaq down 2% leading losses as investors worried that data showing a steady economy would lead the US Federal Reserve to keep A long-term increase in interest rates can be feared.

Micron Technology Inc’s glum forecast for the downbeat mood and caused the semiconductor index (.SOX) to outperform the broader market with its biggest daily decline in more than a month.

Losses in the stock-sensitive growth stocks saw technology (.SPLRCT) and consumer discretionary (.SPLRCD) indexes the heaviest among the S&P 500’s (.SPX) 11 industrial sectors.

The final estimate for the third quarter of US gross domestic product was for 3.2% annual growth, above the previous estimate of 2.9%.

Meanwhile, the Labor Department said filings for federal jobless benefits rose to 216,000 last week but were below the economic estimate of 222,000.

And a third report showed the Conference Board’s leading indicator, a gauge of US economic growth, fell for a ninth month in November.

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“We’re going through one of the biggest worries of 2022 which was the Federal Reserve’s response to higher inflation pressures and worries about 2023, which is an economic slowdown in the United States and possibly around the world,” said Matt Stucky, senior portfolio manager. equity manager at Northwestern Mutual Wealth Management Company.

“Today’s data, in my mind, confirms that this is the direction we’re headed,” Stucky said, adding that high inflation, a bad economy and a tight labor market should lead investors “to come to terms with the reality that earnings projections are really, really high” in 2023. .

The Dow Jones Industrial Average (.DJI) fell 348.99 points, or 1.05%, to 33,027.49, the S&P 500 (.SPX) lost 56.05 points, or 1.45%, to 3,822.39 and the Nasdaq Composite fell (.IX2, IC3). 2.18%, to 10,476.12.

Fears of a recession related to the Fed’s long-term rate hike cycle have weighed heavily on equities this year, with the benchmark S&P 500 (.SPX) on track for an annual decline of 19.8%, which would be its biggest since the 2008 financial crisis. .

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Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 14, 2022. REUTERS/Andrew Kelly

“Strong economic data, especially strong labor market data, keeps the Fed’s foot in the economy,” said Liz Ann Sonders, Chief Investment Strategist at Charles Schwab who would like to see the economic weakness hit “sooner because then it gives strength. It feeds the ability to pause.”

“You increase the risk of overshooting if they continue to be aggressive because the hit is bigger,” he said.

Before stopping, the Fed is expected to look at many weaknesses in the labor market and the economy in order to reduce inflation and keep it stable.

The Philadelphia Semiconductor index (.SOX) closed down 4.3% after falling as much as 6% earlier in the session. Lam Research ( LRCX.O ), the Micron equipment supplier, closed up 8.7% after leading the sector’s declines throughout the day.

Micron itself finished down 3.4%.

Shares of Tesla Inc ( TSLA.O ) fell 8.9% after the electric car maker repeated its discount on the model in the United States this month, amid concerns about slowing demand.

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CarMax Inc (KMX.N) fell 3.7% after the used car retailer suspended share buybacks following an 86% drop in quarterly profit.

Shares of AMC Entertainment Holdings Inc (AMC.N) fell 7.4% after the world’s largest cinema chain said it would raise $110 million through the sale of preferred stock.

Bearish issues outnumbered the NYSE by a 3.78-to-1 ratio; on the Nasdaq, the ratio is 2.04-to-1 in favor of hunger.

The I&P 500 posted 1 new 52-week high and 23 new low; the Nasdaq Composite recorded 79 new highs and 405 new lows.

On American exchanges 10.88 billion shares changed hands, compared to the 11.24 billion average over the last 20 days.

Reporting by Sinéad Carew in New York, Shubham Batra, Amruta Khandekar, Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Shounak Dasgupta, Anil D’Silva and Aurora Ellis

Our standards: The Thomson Reuters Trust Principles.

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