Wall Street fell into a broad sell-off on Tuesday, as consumer confidence data dampened investor optimism and fueled concerns that the Federal Reserve’s aggressive fight against inflation could propel the economy into recession.
The Dow fell 491.27 points, or 1.6%, to 30,946.99, while the Nasdaq fell 343.01 points, or 3%, to 11,181.54. Apple, Microsoft and Amazon were the heaviest drugs.
The S&P 500 dropped 78.56 points, or 2%. With the end of the month and the second quarter two days away, the benchmark S&P 500 is poised for the biggest first half decline since 1970.
All three indices are headed for two consecutive quarters of decline for the first time since 2015.
“At some point this aggressive selling is going to end, but it doesn’t look like it’s going to happen anytime soon,” said Ingels & Snyder, senior portfolio strategist in New York.
Data released Tuesday morning showed the Conference Board’s Consumer Confidence Index fell to its lowest level since February 2021, with near-term expectations reaching their most pessimistic level in nearly a decade.
“(Investors) are sitting around wondering whether the decline in consumer confidence will turn into a recession, and we haven’t addressed that question,” said Tom Hanlin, national investment strategist at US Bank Wealth Management in Minneapolis, Minnesota. “We haven’t seen the second quarter earnings report, so we don’t know whether companies are seeing a slowdown.”
The growing gap between the “current status” and “expectations” components of the Conference Board has widened to levels that often precede recessions:
With some market catalysts and market participants gearing up for the Fourth of July holiday weekend, Hanlin doesn’t blame the day’s sell-off entirely on consumer confidence reports.
“With so much noise around portfolio rebalancing in the quarter-end it is difficult to attribute[the volatility of the market]to one economic data point,” Hanlin said.
“There’s not a lot of new information out there and yet you see this volatile stock environment,” he said, adding that there won’t be a lot of new information until companies start earning earnings.
There are several weeks left for second-quarter reporting to begin, 130 S&P 500 companies have pre-announced. Of them, 45 have been positive and 77 have been negative, resulting in a negative/positive ratio of 1.7 stronger than in the first quarter, but weaker than a year ago, according to Refinitiv data.