US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.
The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. slid at least 5%.
Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.
The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.
In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”
In Europe, new-vehicle sales shrank for a 10th month in a row as the industry remains mired in supply-chain crises, while euro-area inflation plateaued at a record high. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank.
Elsewhere, the Biden administration is poised to fully block Russia’s ability to pay US bondholders after a deadline expires next week, a move that could bring Moscow closer to a default. Sri Lanka, meantime, is on the brink of reneging on $12.6 billion of overseas bonds, a warning sign to investors in other developing nations that surging inflation is set to take a painful toll.
What damage will be done to the US economy and global markets before the Fed changes tack and eases policy again? The “Fed Put” is the theme of this week’s MLIV Pulse survey.
Some of the main moves in markets:
- The S&P 500 fell 4% as of 4 p.m. New York time
- The Nasdaq 100 fell 5.1%
- The Dow Jones Industrial Average fell 3.6%
- The MSCI World index fell 2.7%
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.8% to $1.0465
- The British pound fell 1.2% to $1.2341
- The Japanese yen rose 0.9% to 128.27 per dollar
- The yield on 10-year Treasuries declined nine basis points to 2.89%
- Germany’s 10-year yield declined two basis points to 1.03%
- Britain’s 10-year yield declined two basis points to 1.86%
- West Texas Intermediate crude fell 2.7% to $109.31 a barrel
- Gold futures fell 0.2% to $1,815 an ounce
- (An earlier version of this story corrected the spelling of Walmart.)
–With assistance from Michael Msika, Andreea Papuc, Robert Brand and Isabelle Lee.