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Wall Street ends mostly lower, another volatile day as recession fears loom

Stock market futures tumble as stimulus bill hits roadblock in Congress
Posted at 5:09 PM, Oct 11, 2022
and last updated 2022-10-11 18:11:46-04

Another volatile run on Wall Street left stocks lower Tuesday, extending the market's recent losses as traders brace for updates on inflation and corporate earnings.

The S&P 500 fell 0.7%, marking its fifth straight loss. The benchmark index had been down as much as 1.2% in the early going after a dour forecast from the International Monetary Fund stoked recession fears. It then gained as much as 0.8% before a late-afternoon reversal.

The Nasdaq composite also slid back into the red, ending 1.1% lower. The Dow Jones Industrial Average shed most of a 1.2% gain to finish 0.1% higher.

The major indexes came into the day with four straight losses. Recession fears have been weighing heavily on markets as stubbornly hot inflation burns businesses and consumers. Economic growth has been slowing as consumers temper spending and the Federal Reserve and other central banks raise interest rates.

The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2023 to 2.7%, down from the 2.9% it had estimated in July. The cut comes as Europe faces a particularly high risk of a recession with energy costs soaring amid Russia's invasion of Ukraine.

Wall Street is closely watching the Federal Reserve as it continues to aggressively raise its benchmark interest rate to make borrowing more expensive and slow economic growth. The goal is to cool inflation, but the strategy carries the risk of slowing the economy too much and pushing it into a recession.

"The market desperately wants a reason for the Fed to be able to stop tightening and the data recently hasn't given them that opening with respect to inflation," said Willie Delwiche, investment strategist at All Star Charts.

The S&P 500 fell 23.55 points to 3,588.84, and the Nasdaq dropped 115.91 points to 10,426.19. The Dow added 36.31 points to close at 29,239.19.

Technology accounted for a big share of the decline among S&P 500 companies. Chipmakers continued slipping in the wake of the U.S. government's decision to tighten export controls on semiconductors and chip manufacturing equipment to China. Qualcomm fell 4%.

Banks and communication stocks also weighed on the market, keeping gains in health care and household goods makers in check.

Smaller company stocks fared better than the broader market. The Russell 2000 index rose 1 point, or about 0.1%, to 1,692.92.

Markets in Europe and Asia slipped.

Uber fell 10.4% and Lyft slumped 12% following a proposal by the U.S. government that could give contract workers at ride-hailing and other gig economy companies full status as employees.

U.S. crude oil prices fell 2%.

Bond yields were mixed. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.93% from 3.88% late Friday. The yield on the 2-year Treasury, which follows Federal Reserve action, held steady at 4.30%. Bond markets were closed on Monday for a holiday.

The Fed will release minutes from its last meeting on Wednesday, possibly giving Wall Street more insight into its views on inflation and next steps.

Investors still expect the Fed to raise its overnight rate by three-quarters of a percentage point next month. It would be the fourth such increase, which is triple the usual amount, and bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.

The government will also release its report on wholesale prices Wednesday, which will help provide more details on how inflation is hitting businesses. The closely watched report on consumer prices will be released on Thursday and a report on retail sales is due Friday.

"Everyone is still hoping that every inflation report will be the one that shows that presure is alleviating," Delwiche said.

Wall Street is also gearing up for the start of the latest corporate earnings reporting season, which could provide a clearer picture of inflation's impact, while also raising questions about whether the Fed should continue with its aggressive rate hikes.

Among the companies reporting quarterly results this week: PepsiCo, Delta Air Lines and Domino's Pizza. Banks, including Citigroup and JPMorgan Chase, will also report results.

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Yuri Kageyama contributed to this report.