Wall Street rate cut, recession worries, chipmaker’s bleak outlook

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

By Sinéad Carew and Ankika Biswas

(Reuters) – Wall Street’s main averages closed lower on Thursday with a 2% drop in the tech-heavy Nasdaq as investors worried that data showing a recovering economy would dent The US Federal Reserve continued to raise interest rates longer than feared.

Micron Technology Inc (NASDAQ: )’s dismal forecast added to the upbeat mood and left the semiconductor index underperforming the broader market with its biggest daily drop in over a month. .

Losses in interest-sensitive growth stocks made the tech and consumer discretionary indexes the hardest hit among the industry’s 11 sectors.

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

Meanwhile, the Labor Department said state unemployment claims rose to 216,000 last week but fell short of economists’ estimates of 222,000.

And a third report showed that the Conference Board’s leading index, a measure of future US economic activity, fell for a ninth straight month in November.

“We’re getting past one of the big worries of 2022, which is the Federal Reserve’s response to high inflationary pressures to anxiety,” said Matt Stucky, senior portfolio expert. In terms of 2023, that’s an ongoing recession in the United States and possibly globally.” shares manager at Northwestern (NASDAQ:) Mutual Wealth Management Company.

“Today’s data, in my opinion, confirm that this is the direction we are headed,” Stucky said, adding that inflation is high, the economy is bad and the job market tightening will make investors “realize that earnings estimates are too high” for 2023.

The S&P 500 index fell 348.99 points, or 1.05%, to 33,027.49, the S&P 500 lost 56.05 points, or 1.45%, to 3,822.39 and the S&P 500 index lost 233.25 points, equivalent to 2.18%, to 10,476.12.

Recession concerns related to the Fed’s protracted rate hike cycle have weighed on the stock market this year, with the benchmark S&P 500 index on track to drop 19.8% year-on-year. would be the biggest drop since the 2008 financial crisis.

Liz Ann Sonders, Chief Investment Strategist at Charles Schwab (NYSE:) who want to see the weakness in the economy happen “sooner rather than later because then the Fed is likely to pause.”

“You increase the risk of excess if they continue to be aggressive because then the blow will be bigger,” she says.

Before the pause, the Fed is expected to look for more weakness in the labor market and the economy to reduce inflation and keep it at sustainable levels.

The index closed down 4.3% after falling as much as 6% earlier in the session. Lam Research (NASDAQ), a supplier of Micron equipment, closed down 8.7% after leading the industry’s decline throughout the day.

Micron itself fell 3.4%.

Shares of Tesla (NASDAQ:) Inc fell 8.9% after the electric-car maker doubled discount offers on U.S. models this month, amid concerns about falling demand.

CarMax Co (NYSE:) fell 3.7% after the used-car retailer halted share buybacks following a 86% drop in quarterly profit.

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

The number of stocks that fell was 3.78 to 1 more than the number of stocks that went up on the NYSE; on Nasdaq, the ratio 2.04 to 1 favors the bears.

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

On US exchanges, 10.88 billion shares changed hands, compared with an average of 11.24 billion over the last 20 trading days.


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