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Sept 22 (Reuters) – Major Wall Street indexes fell on Thursday for a third straight session as investors reacted to the Federal Reserve’s latest aggressive move to reign in inflation by selling growth stocks, including technology companies.
The Fed raised interest rates by an expected 75 basis points on Wednesday, signaling a longer trajectory for policy rates than markets had estimated, raising fears of further volatility in stock and bond trading in a year that has already seen bear markets in both asset classes. read more
The U.S. central bank’s economic growth forecasts released on Wednesday also drew attention, rising to 1.2% in 2023 from just 0.2% growth this year.
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After a number of companies—most recently FedEx Corp. and Ford Motor Co.—vibrators were already on the market (FN) – made dire predictions about profits.
According to Refinitiv data, the S&P 500’s third-quarter earnings estimate on Friday was 5%. Excluding the energy sector, the growth rate is -1.7%.
The S&P 500’s forward price-to-earnings ratio, a common gauge for stock valuation, is 16.8 times earnings — well below the roughly 22 times forward P/E the stock commanded at the start of the year.
Nine of the 11 major S&P sectors were down 2.2% and 1.7%, respectively, in consumer discretionary. (.SPLRCD) and finance (.SPSY) stocks.
Stocks of megacap technology and growth companies like Amazon.com Inc (AMZN.O)Tesla Inc (TSLA.O) and Nvidia Corp (NVDA.O) US Treasury yields fell between 1% and 5.3% after hitting an 11-year high.
Raindrops hang from a sign for Wall Street outside the New York Stock Exchange in Manhattan.
Rising earnings are particularly affecting valuations of companies in the technology sector, which have high expected future earnings and make up a significant portion of market-cap-weighted indexes such as the S&P 500.
S&P 500 technology sector (.SPLRCT) It has fallen 28% so far this year, compared with a 21.2% decline in the benchmark index.
“If we continue to have sticky inflation and (Fed Chairman Jerome) Powell sticks to his guns as he said, I think we’re going to go into recession and see a significant reduction in earnings expectations,” said Mike Mullaney, director of global markets in Boston at Partners.
“If that happens, I believe we’ll break 3,636 under these conditions,” he added, referring to the S&P 500’s weakest point of the year in mid-June.
Dow Jones Industrial Average (.DJI) The S&P 500 index fell 107.1 points, or 0.35%, to 30,076.68. (.SPX) The Nasdaq Composite lost 31.94 points, or 0.84%, to 3,757.99. (.IXIC) It decreased by 153.39 points or 1.37% to 11,066.81.
Major U.S. airlines also fell, including United Airlines, which rebounded amid increased travel as pandemic restrictions ended. (UAL.O) and American Airlines (AAL.O) decreased by 4.6% and 3.9%, respectively. This has led to losses of up to 11% for United and 10.6% for American over the past three days.
JetBlue Airways Corp (JBLU.O)It fell 7.1% and closed at its lowest level since March 2020, marking its third consecutive loss.
Darden Restaurants Inc (DRI.N) Olive Garden fell 4.4% after its parent company reported lower sales in the first quarter.
The stock traded 11.39 billion shares over the past 20 trading days, compared to an average of 10.91 billion shares for the full session.
The S&P 500 hit a new 52-week high and a new 123-week low; The Nasdaq Composite recorded 18 new highs and 699 new lows.
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Reporting by Sruthi Shankar, Medha Singh, Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Edited by Shounak Dasgupta, Anil D’Silva and Deepa Babington
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