Standard & Poor’s 500, Dow down as recession fears mount

(Reuters) – The Standard & Poor’s 500 Index and the Dow Jones Index fell on Tuesday as investors worried about the possibility of a recession as central banks around the world take drastic measures to stem rising inflation.

US stocks have come under relentless selling pressure this year, with the S&P 500 (.SPX) posting its biggest first-half percentage decline since 1970, as the Federal Reserve turns away from its easy money policy by increasing borrowing costs.

Investors are now waiting minutes from the Federal Reserve’s June meeting on Wednesday as they prepare to raise interest rates by another 75 basis points at the end of the month.

Traders are also watching economic data, including the US jobs report expected on Friday, and company comments for signs of peak inflation and slowing economic growth, as regular trading began after a long weekend and earnings season approaches.

“Recession fears dominate the market,” said Sam Stovall, chief investment analyst at CFRA.

“The real question is if the economy is slowing down, then how much will disappoint the second quarter earnings or guidance. People are waiting until they get some news that can act as a catalyst.”

Data showed that new orders for US manufactured goods increased more than expected in May, indicating that demand for products remains strong even as the Federal Reserve seeks to cool the economy. Read more

Separately, business growth across the eurozone slowed further in June and European natural gas prices rose again, raising fears of a recession in the bloc. Read more

“Earnings forecasts have been artificially pushed back. Over the next couple of weeks, everyone will start lowering estimates and we expect to see a significant amount of volatility,” said Dan Genter, CEO of Genter Capital Management.

Record US Treasury yields fell on Tuesday and a major part of the yield curve inverted for the first time in three weeks as economic growth concerns reduced risk appetite and increased demand for safe US debt.

Bank stocks, sensitive to the economic outlook, tumbled. The S&P 500 Banks Index (.SPXBK) declined 2.1%, more than the Financials Sector (.SPSY) decline of 1.9%.

Energy stocks (.SPNY) hit five-month lows as recession fears clouded the outlook for oil demand. The materials sector (.SPLRCM) recorded its lowest level since 1-1/5 years as the decline in metal prices affected the shares of mining companies.

At 12:23 PM ET, the Dow Jones Industrial Average (.DJI) was down 492.96 points, or 1.59%, at 30,604.30, and the S&P 500 (.SPX) was down 45.90 points, or 1.20%, at 3,779.43.

The Nasdaq Composite Index (.IXIC) climbed 10.47 points, or 0.09%, to 11,138.31, reversing early losses.

Shares of Warner Bros Discovery Inc (WBD.O) fell 1.5% after reports that broadcast media unit HBO Max has halted production of original shows in Europe.

Declining issues outnumbered advanced stocks by 2.97 to 1 on the New York Stock Exchange and by 1.31 to 1 on the Nasdaq.

The S&P recorded a new 52-week high and 51 new lows, while the Nasdaq recorded 10 new highs and 280 new lows.

Additional reporting by Amruta Khandekar and Shreyachi Sanyal in Bengaluru; Editing by Anil de Silva and Shunak Dasgupta

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