Wall Street’s main indexes dropped on Wednesday, with the Nasdaq down 2% as Microsoft’s outlook weighed down technology stocks, while a bleak quarterly report from Boeing added to fears of a recession.
Shares of Microsoft (MSFT.O) fell 3.9% after it warned that growth in its lucrative cloud business could stall, while its PC unit continued to struggle. The S&P 500 technology index (.SPLRCT) shed 2.1% to lead declines among the 11 major sector indexes.
Growth stocks, however, have enjoyed a bounce in January after a battering last year, with investors now focused on earnings reports to assess the impact of the Federal Reserve’s rate hikes and to gauge whether the renewed enthusiasm for these stocks will be sustained.
“The environment may look attractive because some of these cloud companies, like Salesforce, are down so much, but people are still skeptical because we’re heading into weaker economic news,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
“We still have inflation, we still have the Fed raising interest rates, we’re seeing companies laying off thousands of peoples … We’re not completely through the cycle yet.”
An overwhelming majority of traders expect the Federal Reserve to raise interest rates by another 25 basis points in its meeting next week.
They now see the terminal rate peaking at 4.91% in June, even as Fed policymakers have repeatedly backed taking rates above the 5% level.
Data later in the week is likely to show December personal consumption expenditure index (PCE) fell 0.1% from a 0.1% rise in the prior month. Fourth quarter GDP advance numbers are also awaited.
At 10:07 a.m. ET, the Dow was down 227.63 points, or 0.67%, at 33,506.33, the S&P 500 (.SPX) was down 46.92 points, or 1.17%, at 3,970.03, and the Nasdaq Composite (.IXIC) was down 220.49 points, or 1.95%, at 11,113.79.
In a bright spot, AT&T Inc (T.N) rose 6.2% on higher-than-expected quarterly subscriber additions, while Textron Inc (TXT.N) added 0.3% as revenue beat estimates, boosted by demand for its private jets.
Declining issues outnumbered advancers for a 3.92-to-1 ratio on the NYSE and for a 2.82-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and one new low, while the Nasdaq recorded 29 new highs and 16 new lows.