Tuesday, there was a big sell-off on Wall Street. Investors were worried that the Federal Reserve’s aggressive fight against inflation could push the economy into a recession, which was made worse by bad news about consumer confidence.
The Dow fell 491.27 points, which is 1.6%, to 30,946.99, and the Nasdaq fell 343.01 points, which is 3%, to 11,181.54. Apple, Microsoft, and Amazon slowed things down the most.
The S&P 500 fell by 78.56 points, which is 2%. With the end of the month and the start of the second quarter coming up in two days, the S&P 500 is on track for its biggest drop in the first half of the year since 1970.
All three indexes are likely to fall for two consecutive quarters for the first time since 2015.
Tim Ghriskey, a senior portfolio strategist at Ingalls & Snyder in New York, said, “This aggressive selling is going to stop at some point, but it doesn’t look like it will be any time soon.”
The Conference Board’s consumer confidence index fell to its lowest level since February 2021, according to data released Tuesday morning. Short-term expectations also reached their most pessimistic level in almost a decade.
Tom Hainlin, a national investment strategist at US Bank Wealth Management in Minneapolis, Minnesota, said, “Investors are sitting there wondering if falling consumer confidence will lead to a recession, and we haven’t answered that question yet.” “We haven’t seen the earnings reports for the second quarter, so we don’t know if businesses are slowing down.”
The gap between the Conference Board’s “current situation” and “expectations” has grown to a point that often comes before a recession:
Hainlin doesn’t think that the Consumer Confidence report was the only cause of the day’s sell-off because there were few market drivers and people were getting ready for the Fourth of July holiday weekend.
“It’s hard to link (market volatility) to a single piece of economic data because portfolio rebalancing at the end of each quarter creates a lot of noise,” Hainlin said.
“There isn’t much new information out there, but the stock market is still very volatile,” he said, adding that there won’t be much new information until companies start reporting their earnings.
There are still a few weeks until the second-quarter reports start, but 130 S&P 500 companies have already said what they plan to say. Refinitiv data shows that 45 of these have been positive and 77 have been negative. This gives a negative/positive ratio of 1.7, which is better than the first quarter but worse than a year ago.