Stock losses rise as investors eye earnings and inflation

A late afternoon sell-off wiped out stock gains on Wall Street today and sent the major indices deeper into losing territory for the year.

The sharp flip-flop in the broader market was again led by tech stocks, which sparked choppy trading throughout the week. As investors brace for higher interest rates, stocks of expensive technology companies and other expensive growth stocks look relatively less attractive.

The S&P 500 fell 50.03 points, or 1.1%, to 4,482.73, with nearly 85% of stocks in the index down. The benchmark index closed at a three-month low after rising 1.5% earlier in the day.

The Dow Jones Industrial Average fell 313.26 points, or 0.9% to 34,715.39.

The Nasdaq fell 186.23 points, or 1.3%, to 14,154.02. The index’s losses in recent months had left it Wednesday in what Wall Street considers a market correction, 10% below its peak.

Apple fell 1% and chipmaker Nvidia lost 3.7%.

A mix of retail and communications stocks also fell. Investors changed course from the start of trading and redirected their money to safe investments. Utilities, which are considered less risky, were the only S&P 500 sector to make gains.

Bond yields fell. The 10-year Treasury yield fell to 1.81% from 1.82%.

Stocks are heading for weekly losses in what has so far been a losing month for all major indexes.

“The backdrop of higher rates and slowing growth is a serious concern, but the number of stocks, particularly on the Nasdaq, which is hitting fresh 52-week lows,” said Sean Bandazian, senior investment analyst at Cornerstone Wealth. “There are many broken trends that could make it difficult to find a near-term bottom.”

The slowdown follows a strong 2021 where the S&P 500 gained 26.9%. Investors may revise their expectations going forward, said Mark Hackett, head of investment research at Nationwide.

“Investors are starting to get more realistic about how the world is going to look in the future,” he said.

The Labor Department gave Wall Street a disappointing update on the labor market with its weekly unemployment report. The number of Americans filing for unemployment benefits rose to its highest level in three months as the fast-spreading omicron variant continued to disrupt the job market.

The labor market has experienced a difficult recovery after the virus pandemic. The unemployment rate fell last month to a pandemic low of 3.9%.

The jobs data was also closely watched by investors trying to gauge how it would affect the Federal Reserve’s decision to ease its support for markets and the economy. The central bank made it clear at the start of the pandemic that it was basing much of its support on how quickly employment recovers.

The Fed is now expected to raise interest rates sooner and more often to combat rising inflation that threatens to derail a renewed economic recovery. Supply chain problems and higher raw material costs have prompted companies to raise prices for finished goods, and economists fear consumers will grow weary of paying higher prices and cut spending.

Companies are reminding investors that supply chain issues are still weighing on operations. Recent inflation reports have been worrisome, while economic data on retail sales has also disappointed.

“Those are all things that account for some of the sloppyness we’re starting the year off with,” Hackett said.

The latest round of corporate earnings also gives investors a clearer picture of where Americans are spending money and the impact of inflation on the economy.

American Airlines fell 3.2% and United Airlines fell 3.4% after warning investors that the latest increase in COVID-19 cases will hurt their finances in early 2022. Both airlines recorded losses for the fourth quarter, although they were lower than analysts’ expectations.

Aluminum products maker Alcoa jumped 2.7% after reporting strong fourth-quarter financial results as raw material prices rose. Travelers insurance rose 3.2% after beating analysts’ financial forecasts.

Peloton shares lost about a quarter of their value after CNBC reported that the company was temporarily halting production of its treadmills and exercise bikes. The Business News Network said it reviewed internal Peloton documents that indicated demand for the company’s connected fitness equipment had fallen sharply due to price and competition. Shares of Peloton soared as people exercised from home in the first year of the pandemic, but have fallen 85% since closing at a record high of $167.42 on January 13 2021. On Thursday, its shares fell 23.9% to $24.22.