NEW YORK (AP) — Stocks fell Tuesday morning on Wall Street, weighed down by a sharp drop in tech heavyweights on concerns about the lingering impact of inflation on their bottom line.
The S&P 500 index fell 2.1% at 10:14 a.m. Eastern time. The Dow Jones Industrial Average fell 351 points, or 1.1%, to 31,524 and the Nasdaq fell 3.6%.
A blunt profit warning of Snapchat’s parent company prompted investors to dump shares of major social media companies. Snap fell 39%, while Facebook’s parent company Meta fell 10%. Google’s parent company fell 8%.
Technology and communication stocks, with their high values, tend to have an outsized influence on the market. The sectors have been responsible for much of the volatility the market has seen recently as well as the widespread decline in major market indices since early April as investors worried about the impact of rising inflation on businesses and consumers.
Retailers and businesses that rely on direct consumer spending also fell sharply. Amazon lost 4.3% and Target fell 3.9%.
Bond yields fell. The 10-year Treasury yield fell to 2.75% from 2.86% on Monday evening.
Falling bond yields have weighed on banks, which rely on higher yields to charge more lucrative interest on loans. Citigroup fell 1.9%.
Appliance companies and utilities, considered less risky than other sectors, made gains.
The pile of worries weighing on the market has pushed the benchmark S&P 500 to the brink of a bear market, which is when an index falls 20% from its most recent all-time high. It is down about 19% from its record set earlier this year.
Inflation has weighed on a wide range of industries in the form of higher raw material costs and more expensive labour. Many companies have hiked prices of everything from food to clothing to offset the impact of rising costs, but the pressure has grown. Major retailers including Target and Walmart said higher costs were squeezing operations. They also raised concerns that consumers are moderating their spending on a wide range of products.
Consumers were already squeezed by a supply-demand disconnect when Russia invaded Ukraine and caused another jump in energy prices, including gasoline. The pain at the pump reduced the expenses by a lot. Supply chain issues have been compounded by China’s recent lockdown in several major cities as it copes with rising COVID-19 cases.
Wall Street is also worried about the Federal Reserve’s plan to fight inflation. The central bank is raising interest rates aggressively from historic lows, but investors fear it may go too far in raising rates or act too quickly. This could slow businesses down and potentially trigger a recession. On Wednesday, investors will get a more detailed look at the Fed’s decision-making process with the release of minutes from the latest policy meeting.