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Wall Street pulled by recession fears, S&P heading for fourth decline

  • Meta falls on report of EU concern over targeted ads
  • Energy shares fall as crude oil trades at its lowest level since January
  • Indexes down: Dow 1.39%, S&P 1.78%, Nasdaq 2.22%

Dec 6 (Reuters) – Wall Street’s benchmarks fell again on Tuesday, with the S&P 500 on course for a fourth straight decline, as uncertainty over the direction of Federal Reserve rate hikes and further talk of a looming recession weighed on tight-fisted investors.

Among the biggest drags on the S&P was Meta Platforms Inc ( META.O ), which fell 6.6% on reports that EU regulators have decided the company will not require users to accept personalized ads based on their digital activity.

However, all 11 major S&P sectors were lower in early afternoon trade, with energy and communications services (.SPLRCL) joining the technology sector (.SPLRCT) as the leading laggards. Defensive sectors such as utilities (.SPLRCU), often favored in times of economic uncertainty, fared better.

Future economic growth prospects were in focus on Tuesday following comments from financial titans pointing to uncertain times ahead.

Bank of America Corp’s chief executive forecast three quarters of mildly negative growth next year, while JPMorgan Chase and Co ( JPM.N ) Chief Executive Jamie Dimon said inflation would erode consumer spending power and a mild to more pronounced recession was likely ahead.

Their comments came on the heels of recent views by BlackRock and others who believe the US Federal Reserve’s aggressive monetary tightening to combat stubbornly high inflation could lead to an economic slowdown in 2023.

“There’s a general expectation of a contraction in the economy for the first couple of quarters, and that’s going to have an impact on earnings, which is what investors are focused on,” said Hugh Johnson, chief economist at Hugh Johnson Economics in Albany, New York. York.

Banks are among the most sensitive stocks to an economic downturn, as they potentially face negative effects from bad loans or slowing loan growth. The S&P banks index (.SPXBK) fell 2.6%, with Bank of America leading decliners with a 5.6% drop.

Fears about economic growth come amid a re-evaluation by traders of which way future rate hikes will take, after strong data on jobs and the services sector in recent days.

Money market bets point to a 91% chance that the US central bank can raise interest rates by 50 basis points at its policy meeting on 13-14. December, with rates expected to peak at 4.98% in May 2023, up from 4.92% forecast on Monday before services sector data was released.

The S&P 500 gained 13.8% in October and November on hopes of smaller rate hikes and better-than-expected earnings, although expectations for slower rate hikes could be undermined by additional data releases, including producer prices due on Friday.

“If economic growth continues to be better than what people expect, chances are the Fed will have to continue to be hawkish,” said Rusty Vanneman, investment strategist at Orion Advisor Solutions.

At 14:21 ET (1921 GMT), the Dow Jones Industrial Average (.DJI) fell 472.5 points, or 1.39%, to 33,474.6, the S&P 500 (.SPX) lost 71.19 points, or 1, 78%, to 3.927. The Nasdaq Composite (.IXIC) fell 249.91 points, or 2.22%, to 10,990.03.

Jitters about the direction of global growth have also weighed on oil prices, with US crude falling to levels last seen in January, before Russia’s invasion of Ukraine disrupted supply markets. The energy sector (.SPNY) fell 2.6% on Tuesday.

Elsewhere, Mirati Therapeutics Inc ( MRTX.O ) fell 21.1% – on course for its biggest daily drop since March 2020 – after the company reported disappointing early trial data on experimental cancer drug adagrasib.

Textron Inc ( TXT.N ) climbed 4.9% after the U.S. Army awarded the contract for its next-generation helicopter to the company’s Bell unit.

Reporting by Devik Jain, Ankika Biswas and Johann M Cherian in Bengaluru and David French in New York; Editing by Vinay Dwivedi, Shounak Dasgupta and Lisa Shumaker

Our standards: Thomson Reuters Trust Principles.

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