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NEW YORK — Stocks fell in morning trading on Wall Street on Tuesday, weighing the tech giants’ slump as concerns over the impact of ever-increasing inflation on their bottom line.
The S&P 500 index fell 2.1% as of 10:14 a.m. in the East. The Dow Jones Industrial Average fell 351 points, or 1.1%, to 31,524 and the Nasdaq fell 3.6%.
A harsh profit warning from Snapchat’s parent company has spurred investors to drop stocks of major social media companies. Snap fell 39% and Facebook’s parent Meta fell 10%. Google’s parent fell 8%.
Technology and communications stocks, with their high valuations, tend to have a huge impact on the market. Industries were responsible for much of the market’s recent volatility, along with the broad drop in the market’s main indices since early April as investors worried about the impact of rising inflation on businesses and consumers.
Retailers and companies that rely on direct consumer spending also fell sharply. Amazon fell 4.3 percent and Target 3.9 percent.
Bond yields fell. The 10-year Treasury rate fell to 2.75% from 2.86% late Monday.
Falling bond yields have put banks that rely on higher yields to charge more profitable interest on loans. Citigroup fell 1.9 percent.
Houseware companies and utilities, which are seen as less risky than other industries, gained.
The stockpile of concerns weighing on the market has pushed the benchmark S&P 500 to the brink of a bear market; this is when an index drops 20% from its most recent record level. It’s down roughly 19% from the record level earlier this year.
Inflation is putting pressure on a wide variety of industries in the form of higher raw material costs and more costly labor. Many businesses are raising the price of everything from food to clothing to offset the impact of higher costs, but the pressure is mounting. Key retailers, including Target and Walmart, said higher costs are tightening operations. They also voiced concerns that consumers are easing spending on a wide range of goods.
When Russia invaded Ukraine and sparked a new jump in energy prices, including gasoline, consumers were already stuck with the disconnection of supply and demand. The pain at the pump cut spending for many. Supply chain problems have been exacerbated by China’s recent quarantine in several major cities as it deals with rising cases of COVID-19.
Wall Street is also worried about the Federal Reserve’s plan to fight inflation. The central bank is aggressively raising interest rates from historic lows, but investors are worried it may go too far or move too quickly in raising interest rates. This can slow businesses down and potentially cause a recession. On Wednesday, investors will get a more detailed look at the Fed’s decision-making process with the release of the minutes of its latest policy meeting.
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