Wall Street’s main indexes tumbled in midday trading on Tuesday as a sharp drop in consumer confidence brought to the fore growth risks from rising inflation.
The Dow Jones Industrial Average .DJI and the S&P 500 .SPX shed the initial gains from a rise in bank shares as the latest batch of economic data raised doubts on the U.S. economy’s resilience to withstand hefty interest rate hikes from the Federal Reserve.
The consumer confidence index dropped 4.5 points to a reading of 98.7 in June, a Conference Board survey showed, as consumers anticipated economic growth would weaken significantly in the second half of the year due to rising inflation.
Last week, the University of Michigan said its final consumer sentiment index reading for June fell to a record low, and another report pointed to slowing U.S. business activity this month.
The reports underscore U.S. consumers responding to the slowdown in the economy, coupled with still higher prices, according to Quincy Krosby, chief equity strategist at LPL Financial in Charlottesville, Virginia.
“Clearly, the Fed’s more aggressive path towards curtailing inflationary pressures is affecting how consumers view the short-term economic landscape, which continues to move sharply lower.”
The S&P 500 consumer discretionary sector .SPLRCD, along with technology .SPLRCT and communication services .SPLRCL, which house high-growth stocks, led sectoral declines with falls of about 2% each.
U.S. Treasury yields rose, with the short end of the curve rising above the long end, supporting the Fed’s tough stance on policy tightening. US/
The S&P 500 .SPXis now on track for the worst start to the year since 1970, with declines of over 19% so far.
At 12:54 p.m. ET the Dow was down 212.52 points, or 0.68%, at 31,225.74, the S&P 500 was down 41.15 points, or 1.06%, at 3,858.96 and the Nasdaq Composite .IXIC was down 209.33 points, or 1.82%, at 11,315.23.
Morgan Stanley MS.N rose 2.1%, leading gains among big banks including Goldman Sachs GS.N, Bank of America BAC.N and Wells Fargo WFC.N. The S&P 500 banks index .SPXBK rose 0.5%.
Shares of Walt Disney Inc DIS.N gained 1.3% after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.
Nike Inc NKE.N shed 4.5% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.
Occidental Petroleum Corp OXY.N climbed 3.4% after Warren Buffett’s Berkshire Hathaway Inc BRKa.N raised its stake in the shale producer.
The S&P 500 energy sector index .SPNY rose 2.3% for the third straight day.
Airlines, cruises, casinos and hotels rose after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.