Wall Street closed sharply lower as consumer pessimism sparked recession fears

A trader works at the New York Stock Exchange (NYSE) in New York City, US, June 22, 2022. REUTERS/Brendan McDermid

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NEW YORK (Reuters) – Wall Street slid into a broad sell-off on Tuesday as poor consumer confidence data dampened investor optimism and fueled fears that the Federal Reserve’s fierce battle against inflation could push the economy into recession.

The three major US stock indexes closed sharply lower, with the tech-laden Nasdaq pulling back the most. Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and Amazon.com (AMZN.O) were the heavyweights.

With the end of the month and the second quarter two days later, the benchmark S&P 500 is on track to post the largest first-half percentage decline since 1970.

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All three indices are on track to post two consecutive quarterly declines for the first time since 2015.

“At some point, that intense selling will dissipate, but it doesn’t look like it will be any time soon,” said Tim Gresky, senior portfolio strategist at Ingalls & Snyder in New York.

Data released Tuesday morning showed the Conference Board’s Consumer Confidence Index fell to its lowest level since February 2021, with the near-term outlook reaching its most pessimistic level in nearly a decade. Read more

“(Investors) are sitting there asking whether the decline in consumer confidence will translate into a recession and we haven’t solved that question,” said Tom Heinlein, a national investment analyst at US Bank Wealth Management in Minneapolis, Minnesota. “We haven’t seen second-quarter earnings reports, so we don’t know if companies are seeing a slowdown.”

The growing gap between the “status” and “expectations” components of the Conference Board has widened to levels that often predate the recession:

According to preliminary data, the S&P 500 index lost 78.02 points, or 2.00%, to close at 3,822.09 points, while the Nasdaq Composite Index lost 343.06 points, or 2.98%, to 11,181.50. The Dow Jones Industrial Average fell 490.78 points, or 1.56%, to 30,947.48.

With little market stimulus and market participants gearing up for the 4th of July weekend, Hainlin doesn’t blame the consumer confidence report for the whole day’s sell-off.

“It’s hard to attribute (market volatility) to a single economic data point with so much hype around portfolio rebalancing at the end of the quarter,” Heinlein said.

“There’s not a lot of new information but you see this volatile stock environment,” he said, adding that there won’t be a lot of new information until companies start turning in profits.

With several weeks left until the start of second-quarter reports, 130 companies on the S&P 500 have announced ahead of time. Of those, 45 were positive and 77 were negative, resulting in a negative/positive ratio of 1.7 stronger than the first quarter but weaker than last year, according to Refinitiv data.

Nike Inc (NKE.N) declined after revenue expectations were lower than expected. Read more

Shares of Occidental Petroleum Corp (OXY.N) rose after Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) subsidiary raised its stake in the company.

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Stephen Kolb reports. Additional reporting by Caroline Valitkevich in New York and Shreyachi Sanyal and Amruta Khandekar in Bengaluru. Editing by Grant McCall

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