Stocks fell on Wednesday as investors kept an eye on the bond market and signs of an economic slowdown.
The Dow Jones Industrial Average shed 324 points, or nearly 1%. The S&P 500 dipped 1.1%, while Nasdaq Composite ticked down 0.9%.
The moves came as investors weighed updates from major companies and signs that economic growth may be slowing.
Overseas, Credit Suisse issued a profit warning for the second quarter, citing tighter monetary policy and the war in Ukraine. Target, which issued its own warning on Tuesday, was downgraded to neutral from buy by Bank of America. Intel dropped more than 5% after management warned of weakening demand for semiconductors at an industry conference.
Meanwhile, the Atlanta Federal Reserve’s GDPNow tracker now shows a growth rate of just 0.9% for the second quarter, down from 1.3% last week. Mortgage demand hit its lowest level in 22 years last week, according to the Mortgage Bankers Association.
As the Fed continues to tighten monetary conditions, the concerns about economic growth and corporate earnings could have a bigger impact on stocks, Allianz chief economic advisor Mohamed El-Erian said on “Squawk Box.”
“The markets have been taking this news much better than they would have otherwise, but if I were fully invested right now, I’d take some chips off the table. I would wait for more value to be created,” El-Erian said.
Action in the bond market may have hurt investor sentiment on Wednesday, as the 10-year Treasury yield jumped back above 3%. The price of oil also rose, with U.S. benchmark West Texas Intermediate crude pushing well above $2 per barrel.
Elsewhere, shares of Robinhood fell more than 4% after Securities and Exchange Commission Chair Gary Gensler detailed potential rule changes around trade execution, such as possibly requiring retail orders to routed into auctions. Moderna rose 2.3% after its modified Covid-19 booster shot showed a stronger response to new variants.
On the earnings front, Campbell Soup moved higher by about 2.3% after a stronger-than-expected quarterly report.
Investors are looking toward Friday’s consumer price index reading for May. Many believe the print will be crucial for the path of Fed policy and whether the central bank will keep raising rates in half-point increments.
“We believe equity markets would likely rally at any hint of a pause in the expected rate-hike cycle. Positive consumer data could also help relieve some growth fears but, in some circumstances, could also further concerns that the Fed needs to get more aggressive to cool demand,” Wells Fargo strategist Scott Wren said in a note to clients.
“Stock market rallies at this point will likely see headwinds and not meaningful follow through until there are clear signs the Fed is succeeding in controlling inflation,” Wren added.
The stock market has had a roller-coaster year as the Fed’s aggressive rate hikes stoked recession fears. The S&P 500 is off nearly 14% from its all-time high reached in January. The equity benchmark briefly dipped into bear market territory on an intraday basis last month.
Investors monitored some signs of an economic slowdown ahead of a key inflation reading.