Dow falls over 450 factors, markets fall after a spate of worrying financial information

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Buoyed by a decline in major tech stocks and pandemic darlings, the market slumped on Thursday as investors departed from Wednesday’s cautious optimism, with several macroeconomic indicators highlighting recession worries and fears of tighter monetary policy.

Traders work on the floor of the New York Stock Exchange on Thursday as stocks shed Wednesday’s gains.

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Important facts

The Dow Jones Industrial Average fell 1.5%, or 458 points, reversing its gain of 540 points the previous day, while the tech-heavy Nasdaq fell 2.8% and the S&P 500 fell 2.1%.

Investors reacted negatively to payrolls data that revealed a tighter-than-expected job market, interpreting this as a spur for the Federal Reserve to raise interest rates further.

Several other economic indicators also spooked the market, including rising mortgage rates, a shrinking US economy and the UK government delving into its controversial economic policies.

“Job market conditions are likely to keep the Fed on course to aggressively tighten monetary policy at the next November meeting,” Jeffrey Roach, LPL Financial’s chief economist, said Thursday.

Shares of home fitness company Peloton fell 14% on Thursday after the company announced a partnership with Dick’s Sporting Goods, briefly hitting an all-time low below $7, while shares of other pandemic-era climbers Carvana and CarMax each fell about 20% fell.

The S&P fell across sectors, but tech giants Alphabet, Meta, Apple and Amazon were among the notable losers, each down more than 2.5%, while Tesla lost 6.8%.

Apple’s plunge came after Bank of America downgraded its rating on the company from “buy” to “neutral” over concerns about slowing demand as the company enters the iPhone 14 cycle — the stock is down more than 6% in the last two days.

Surprising fact

The Dow is down over 7% in September, down 20% year-to-date and is just 7% off its pre-Covid-19 pandemic peak, according to Bespoke Investment Group.

key background

Investors continue to react poorly to Peloton’s numerous changes to its business model, and the stock has fallen more than 95% since its January 2021 peak. Seasonally adjusted initial jobless claims fell to 193,000 last week, well below economists’ estimates and the lowest in five months, according to data released by the Labor Department on Thursday. Inflation remains at its highest level in four decades, and given that inflation has historically risen while unemployment has fallen, a tightening labor market is seen as justifying further rate hikes by the Federal Reserve. Fed Chair Jerome Powell said last week the “jobs market has remained out of whack”. U.S. gross domestic product shrank 0.6% in the second quarter of 2022, according to the Bureau of Economic Analysis’s final estimate released Thursday, the second straight quarter of negative growth — technically a recession.

Big number

6.7%. That’s the 30-year fixed mortgage rate, mortgage provider Freddie Mac said Thursday, the highest since July 2006. Mortgage rates are up from 5.66% a month ago and 3.01% a year ago. Mortgage payments are up 15% compared to six weeks ago, according to real estate agent Redfin.

Crucial quote

“For a more sustained rally, investors need to see compelling evidence that inflation is coming under control for central banks to become less hawkish,” UBS chief investment officer Mark Haefele said on Thursday.

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Tech Recession Confirmed: Economy Shrunk 0.6% In Latest Quarter, Final GDP Shows (Forbes)

Dow climbs 500 points as investors shake off recession fears (Forbes)

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