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Wall Street drops as weak economic data fuels recession fears

2023-04-04T18:33:39Z

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 30, 2023. REUTERS/Brendan McDermid

Wall Street fell on Tuesday as evidence of a cooling economy exacerbated worries that the Federal Reserve’s campaign to rein in decades-high inflation may cause a deep downturn.

All three major stock indexes were lower at mid-day after data showed U.S. job openings in February dropped to the lowest level in nearly two years, suggesting that the labor market was cooling, while factory orders fell for a second straight month.

Data on Monday had also pointed to weakening U.S. manufacturing activity.

“The number of job openings has decreased, which makes people worry that hiring is going too slow, and that will be bad for the economy. That feeds into recessionary fears,” said Sal Bruno, Chief Investment Officer at IndexIQ in New York.

Bank stocks took a hit after JPMorgan Chase & Co (JPM.N) CEO Jaime Dimon warned in a letter to shareholders that the U.S. banking crisis is ongoing and that its impact will be felt for years.

Bank of America (BAC.N) and Wells Fargo & Co (WFC.N) dropped more than 2%, and the S&P 500 banks index (.SPXBK) fell 2.3%.

Of the 11 S&P 500 sector indexes, seven declined, led lower by industrials (.SPLRCI), down 2.01%, followed by a 1.57% loss in energy (.SPNY).

Caterpillar Inc (CAT.N), viewed as bellwether for the industrial sector, tumbled 5.1%.

Healthcare (.SPXHC) and utilities (.SPLRCU), which many investors expect to hold up better during an economic slowdown, were among the few S&P 500 sector indexes gaining on Tuesday.

Trading in interest rate futures shows bets are now tilted toward a pause by the Fed in May, with odds of a 25-basis point rate hike at 42%, compared with nearly 60% before the data, according to CME Group’s Fedwatch tool.

In afternoon trading, the S&P 500 was down 0.56% at 4,101.58 points.

The Nasdaq declined 0.47% to 12,131.64 points, while the Dow Jones Industrial Average was down 0.65% at 33,383.70 points.

The S&P 500 and the tech-heavy Nasdaq have gained nearly 7% and 16%, respectively, so far in 2023.

Virgin Orbit Holdings Inc (VORB.O) slumped almost 26% after the satellite launch company filed for Chapter 11 bankruptcy on failing to secure long-term funding.

AMC Entertainment Holdings Inc (AMC.N) shares tumbled about 23% after the movie theater chain said it agreed to settle litigation and proceed with converting its preferred stock into common shares.

Shares of Digital World Acquisition Corp (DWAC.O) fell 5.3% after the SPAC linked to former U.S. President Donald Trump delayed the filing of its annual financial report.

Declining stocks outnumbered rising ones within the S&P 500 (.AD.SPX) by a 3.5-to-one ratio.

The S&P 500 posted 12 new highs and no new lows; the Nasdaq recorded 56 new highs and 204 new lows.

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