Stocks fell sharply Thursday after new data showed retail sales fell more than expected in November, raising fears that the Federal Reserve’s relentless interest rate hikes are tipping the economy into a recession.
The Dow Jones Industrial Average fell 940 points, or 2.78%. The S&P 500 dropped 2.88%, while the Nasdaq Composite lost 3.4%.
The sell-off was broad-based with only 14 stocks in the S&P 500 trading in positive territory. Mega-cap tech stocks declined, with shares of Apple and Alphabet down more than 4%, and shares of Microsoft and Amazon more than 3% lower.
Shares of Netflix fell more than 9% following a Digiday report that the streaming firm is offering to return money to advertisers after missing viewership targets.
Meanwhile, Treasury prices rose, pushing yields lower, as traders searched for safety. The 10-year yield fell below 3.5%.
Those moves follow a disappointing retail sales report that suggested inflation is taking a toll on consumers. Retail sales fell 0.6% in November, according to the Commerce Department. That was a bigger loss than the Dow Jones estimate of a 0.3% decline.
Investors are coming off a losing session as they continued to absorb the Federal Reserve Chair Jerome Powell’s latest comments after the Fed boosted its overnight borrowing rate.
The central bank said it will continue hiking rates through 2023 and projected its fed funds rate to peak at a higher-than-expected 5.1%. With Wednesday’s half a percentage point hike, the targeted range for rates is currently 4.25% to 4.5%, the highest in 15 years.
Despite improvements in growth, spending and production, Powell indicated he remains concerned job gains are too robust and the unemployment rate is too good for the Fed’s fight against inflation.
“People assume earnings are going to come down, but it’s the magnitude of that decline and how fast it’s going to happen — we think that is where the surprise is,” Morgan Stanley strategist Mike Wilson said Thursday on CNBC’s “Squawk Box.”
“That negative operating leverage that we see from that falling inflation… is what is going to hurt margins, and that’s irrespective of whether there is an economic recession,” Wilson added.
— CNBC’s Michelle Fox contributed to this report.
