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Wall Street ends down for third day as growth concerns weigh on tech By Reuters

© Reuters. FILE PHOTO: A Wall St. street sign is seen near the New York Stock Exchange (NYSE) in New York City, US, Sept. 17, 2019. REUTERS/Brendan McDermid/File Photo

By David French

(Reuters) – Major Wall Street indices closed lower on Thursday, falling for a third straight session as investors reacted to the Federal Reserve’s latest aggressive move to curb inflation by selling growth stocks, including tech companies.

The Fed hiked rates expected to be 75 basis points on Wednesday, signaling a longer trajectory for key rates than markets had priced in, fueling fears of further volatility in stock and bond trading in a year that has seen bear markets in both asset classes.

The US Federal Reserve’s economic growth projections released on Wednesday were also striking, growing just 0.2% this year, rising to 1.2% for 2023.

The market has already been jitters after a number of companies — most recently FedEx Corp (NYSE:) and Ford Motor (NYSE:) Co. — issued poor earnings prospects.

As of Friday, the estimated third-quarter earnings growth is 5%, according to data from Refinitiv. Excluding the energy sector, growth is -1.7%.

The S&P 500’s price-to-earnings ratio, a common measure of stock valuation, is 16.8 times earnings – well below the nearly 22 times the price-to-earnings ratio stocks had at the start of the year.

Nine of the 11 major S&P sectors fell, led by 2.2% and 1.7% declines in consumer discretionary and financial stocks, respectively.

Shares of mega-cap technology and growth companies such as Inc (NASDAQ:), Tesla (NASDAQ:) Inc and Nvidia (NASDAQ:) Corp fell between 1% and 5.3% as benchmark yields on US Treasury bonds peaked in reached 11 years. [US/]

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Rising returns are particularly weighing on the valuations of companies in the technology sector, which have high projected future earnings and make up a significant proportion of market cap-weighted indices such as the S&P 500.

The S&P 500’s technology sector is down 28% so far this year, compared to a 21.2% drop in the benchmark index.

“If we continue to have sticky inflation, and if (Fed Chairman Jerome) Powell sticks to his guns, as he points out, I think we’re going into a recession and we’re going to see a significant drop in earnings expectations,” said Mike Mullaney, director of global markets in Boston. Partners.

“If this happens, under those circumstances, I strongly believe we’ll break 3,636,” he added, referring to the mid-June low of the S&P 500, the year’s weakest point.

The S&P 500 fell 107.1 points or 0.35% to 30,076.68, the S&P 500 lost 31.94 points or 0.84% ​​to 3,757.99 and the S&P 500 fell 153.39 points or 1.37% to 11,066.81.

Major U.S. carriers — which have seen a rebound amid increased travel as pandemic restrictions end — also fell, with United Airlines and American Airlines (NASDAQ:) dropping 4.6% and 3.9%, respectively. This brought losses over the past three days to 11% for United and 10.6% for American.

JetBlue Airways (NASDAQ:) Corp, down 7.1% and also a third consecutive loss, closed at its lowest level since March 2020.

Darden Restaurants Inc (NYSE:) fell 4.4% after parent company Olive Garden reported disappointing first-quarter sales.

Volume on US stock exchanges was 11.39 billion shares, compared to the full-session average of 10.91 billion over the past 20 trading days.

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The S&P 500 posted a new 52-week high and 123 new lows; the Nasdaq Composite recorded 18 new highs and 699 new lows.



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