Wall Street slumps amid recession worries

US stock indexes have tumbled, with growth shares bearing the brunt of the sell-off after the Federal Reserve’s largest rate increase since 1994 to combat decades-high inflation fanned worries of a recession.

All of the 11 major S&P sectors fell in morning trade.

Energy and consumer discretionary sectors were the top losers, down 4.2 per cent and 3.6 per cent respectively.

Mega-cap growth firms Amazon.com, Microsoft Corp, Apple Inc and Tesla Inc slid between 2.5 per cent and 6.0 per cent, also pressured by rising US Treasury yields.

All the Dow components were in the red at the start of trading while 496 constituents of S&P 500 index fell.

The benchmark index snapped a five-session losing streak on Wednesday after the Fed’s 75 basis point rate increase matched market expectations.

Equities have been under pressure for most of the year on growing worries about surging inflation and higher borrowing costs, with the central bank’s latest projection of a slowing US economy and rising unemployment in the coming months only fuelling those concerns.

“We view it as increasingly likely that a recession and higher unemployment will be necessary to tame inflation: with such a gloomy macro picture looming over the markets,” said Geir Lode, head of global equities at Federated Hermes Ltd.

Wells Fargo said the odds of a recession now stand at more than 50 per cent, following the Fed decision.

The S&P 500 is down 22.6 per cent year-to-date and is in a bear market as investors grapple with a sharp slowdown in growth.

The Nasdaq Composite and the S&P 500 indexes were set to mark their 10th weekly decline in the past 11 weeks.

“Technically, the market remains weak,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“The Fed rally is fading as investors question the central bank’s ability to orchestrate a soft landing. The bear market is in full force still and yet to reach a level where stocks can comfortably bounce off of.”

In early trading, the Dow Jones Industrial Average was down 692.04 points, or 2.26 per cent, at 29,976.49, the S&P 500 was down 105.57 points, or 2.79 per cent, at 3,684.42, and the Nasdaq Composite was down 355.94 points, or 3.21 per cent, at 10,743.21.

Among major US banks, Morgan Stanley led losses with a 4.0 per cent slide.

The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 31.51 points.

Declining issues outnumbered advancers for a 15.15-to-1 ratio on the NYSE and for a 7.14-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 78 new lows while the Nasdaq recorded three new highs and 400 new lows.

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