By DAMIAN J. TROISE and ALEX VEIGA – AP Business Writers
NEW YORK (AP) — Stocks faltered Thursday afternoon on Wall Street as lingering inflation continues to weigh on the economy and keeps major indexes mired in a deep recession.
The S&P 500, the benchmark for many index funds, just suffered its biggest drop in nearly two years. It eased an early stumble and fell 0.3%. It is down about 18% from the record it set earlier this year. This is just below the 20% point that defines a bear market.
The Dow Jones Industrial Average fell 142 points, or 0.5%, to 31,342 at 3:23 p.m. EST, and the Nasdaq rose 0.1%.
Rising interest rates, high inflation, the war in Ukraine and one Chinese economic slowdown have caused investors to reconsider the prices they are willing to pay for a wide range of stocks, from high-flying tech companies to traditional automakers. Investors worry that soaring inflation that hurts people shopping and filling up their cars will also hurt corporate profits.
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Target fell another 4.9% on the day after losing a quarter of its value on a surprisingly weak earnings report.
Wall Street is also worried the federal reserve plan fight the highest inflation in four decades. The Fed is raising interest rates aggressively and investors fear the central bank could cause a recession if it raises rates too high or too quickly.
The 10-year treasury fell back to 2.85% from 2.88% late Wednesday, but generally rose as investors brace for a market with higher interest rates. This also has drives up mortgage rateswhich contributes to a slowdown in home sales.
The pile of worries on Wall Street led to very choppy trading and big swings between gains and losses on any given day.
Tech stocks have been among the most volatile holdings. The sector includes heavyweights like Apple that have high valuations, which tends to push the market more forcefully up or down. The sector was particularly affected by the Fed’s policy change aimed at raising interest rates. Low rates help support investments considered riskier, such as tech stocks, and higher rates reduce the incentive to take that risk.
Tech stocks fell on Thursday, contributing to the choppy market. Cisco Systems fell 14.3% after the router and switch vendor cut its profit forecast amid supply chain constraints. Synopsis jumped 11.6% after the software company raised its financial forecast for the year.
Household goods companies, grocery store operators and food producers overall fell. General Mills fell 1.7% and Clorox 4.8%.
Retailers and other businesses that rely on direct consumer spending were mostly higher. Amazon rose 0.8% and Expedia 5.4%. Bath & Body Works fell 5.1% after it cut its profit forecast for the year.
With the S&P 500 having changed little, the index remained close to a bear market, but without moving firmly in the direction of falling into one. The last bear market occurred just two years ago, after the virus pandemic began.
Why use a bear to denote a market crash? Bears are hibernating, so they represent a declining market, said Sam Stovall, chief investment strategist at CFRA. By contrast, Wall Street’s nickname for a booming stock market is a bull market, because the bulls are charging.
Veiga reported from Los Angeles.
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