US stocks wavered Thursday on growing worries of an economic slowdown that sent investors into the haven of government bonds.
The S&P 500 was recently up about 0.1%, though still close to bear market territory—market shorthand for a 20% fall from a recent high. the index tumbled 4% Wednesdayits biggest one-day retreat since June 2020. After that drop, the S&P 500 had retreated more than 18% from its January all-time high.
The Dow Jones Industrial Average fell about 0.5% Thursday, putting it about 15% below its all-time closing high. The Nasdaq Composite Index, which entered bear-market territory earlier this year, pared early losses and was recently up about 1%.
Investors bought government bonds, perceived as a haven asset in times of economic uncertainty. The yield on 10-year Treasury notes fell to 2.835% from 2.884% Wednesday. Thursday’s move put yields, which had shot up for much of the year as the Federal Reserve began to raise interest rates, on course to fall for seven of the last nine trading days. Bond yields and prices move in opposite directions.
gained 3.9% after saying sales weakened in Aprilmaking it the latest retailer to point to inflationary pressures on demand.
this week said higher costs ate into profits in the latest quarter, leading to a selloff of their shares that rippled through the broader market.
Earnings reports from some of America’s biggest retailers in recent days added to concern that the highest rate of inflation in four decades is catching up with US consumers and pitching the economy toward a recession. Investors were already grappling with the end of an era of loose monetary policy that stoked big gains for stocks and other risker assets.
Anthony Saglimbene, global markets strategist at Ameriprise Financial, said economic data point to healthy consumer spending, allaying fears of a recession.
“For consumers to really retrench spending, they have to fear that they’re going to lose their jobs and that’s just not the environment we’re in,” said Mr. All right.
Some analysts, however, say a slowdown in consumer spending could mean the Federal Reserve wouldn’t have to raise interest rates as aggressively to lower consumer demand.
“Some amount of slowdown in discretionary spending will help organically or naturally ease the supply chain constraints,” said Seth Wunder, Acorns’ chief investment officer. “At the end of the day, that is one of the largest inputs to the inflationary issues we’re facing.”
In economic news, the Labor Department said new applications for unemployment benefits rose for the third week in a row. Initial jobless claims, a proxy for layoffs, remain historically low. Separately, US home prices reached a new high in Aprilaccording to fresh data, but the number of sales fell.
the war in Ukraine is adding to the inflationary pressures prompting the Fed to embark on a series of interest-rate rises and to reduce its bondholdings. And Covid-19 shutdowns in China have led to a sharp slowdown in the world’s second-biggest economy.
Cisco Systems tumbled 14% after the communication-equipment firm missed analyst expectations for its quarterly results.
said gasoline sales boosted revenue and profit in its first quarter, sending shares 10% higher.
“The critical bit here is how earnings hold up,” said Desmond Lawrence, senior investment strategist at State Street Global Advisors. “We’re in a very uncertain time, so we expect more volatility.”
The combination of factors has fed into steep losses for stocks and some corporate bonds, and many investors expect the volatility to continue. “The price action suggests it’s not over,” said Philip Saunders, a portfolio manager at
an asset manager based in the UK and South Africa.
The last time the S&P 500 fell into a bear market was during the pandemic panic in March 2020. It was short lived, and the market quickly launched on a two-year rally that peaked this Jan. 3. The Dow industrials, which are more weighted to old-line industrial companies and banking stocks, have performed less badly and are still some ways from bear market territory.
“Throw monetary policy tightening into the mix, we’ve got a recipe for volatility and investor jitteriness,” said Clara Cheong, a global market strategist at JP Morgan Asset Management.
In energy markets, global oil benchmark Brent crude gained 1.2% to $110.43 a barrel.
International stocks retreated, tracking the US selloff. The Stoxx Europe 600 shed 1.4%, led lower by shares of financial-services and food-and-beverage companies. Hong Kong’s Hang Seng Index tumbled 2.5% as shares of Tencent dropped 6.5% after the videogame giant reported its worst quarterly profit drop since listing in the city.
Among individual European stocks,
lost 1.2% after Fitch Ratings downgraded the bank’s credit rating to BBB+. Swiss private bank Julius Baer Gruppe dropped 6.7% after saying its assets under management fell in the first four months of the year.
Elsewhere in Asia, the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen edged up 0.2%. Japan’s Nikkei 225 dropped 1.9% and South Korea’s Kospi Composite declined 1.3%.
—Dave Sebastian contributed to this article.
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