(Reuters) – Technology stocks led a slide on Wall Street on Thursday, with the S&P 500 languishing at 15-month lows and the Nasdaq flirting with bear market territory, after the Federal Reserve quashed hopes of a toned-down approach to its interest-rate hike path.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 19, 2018. REUTERS/Brendan McDermid
Adding to the gloom were a few disappointing earnings reports and the U.S. Congress scrambling to agree on a funding bill ahead of a Friday midnight deadline to prevent a partial shutdown of the federal government.
The Nasdaq was down 2.3 percent at its session low, pushing the tech-heavy index more than 20 percent below its Aug. 29 closing high. If it closes at those levels, it will have confirmed bear territory.
The Fed’s move on Wednesday to largely adhere to its plan for more rate hikes over the next two years and Chairman Jerome Powell’s plan keep the central bank’s balance sheet-reduction plan on “autopilot” spooked investors already worried about slowing economic growth.
That sparked a retreat in growth sectors such as technology and healthcare, as investors sought comfort in the relative safety of defensive sectors such as utilities and real estate.
The technology sector, which had led most of the market’s decade-long bull run, also entered bear market territory at its session low. The index was last off 2.01 percent and the biggest drag on the market.
Consumer stocks also fell on worries of higher borrowing costs adding to signs of slowing consumer spending in the run-up to Christmas. The consumer discretionary index slid 2.36 percent, while the normally defensive staples sector fell 1.46 percent.
“There is more carry-over from Powell’s comments. Investors don’t see a catalyst and realize the Fed will no longer be spiking the punch bowl at the party and that’s what people are trying to grapple with now,” said Sandy Villere, portfolio manager of the Villere Balanced Fund in New Orleans.
At 1:03 p.m. ET the Dow Jones Industrial Average was down 412.37 points, or 1.77 percent, at 22,911.29, the S&P 500 was down 36.48 points, or 1.46 percent, at 2,470.48 and the Nasdaq Composite was down 111.19 points, or 1.68 percent, at 6,525.64.
The Dow Jones Transport Average, considered a barometer of economic activity, was down 1.10 percent moving deeper into bear market territory.
The CBOE Volatility index, the most widely followed barometer of expected near-term volatility for the S&P, jumped to its highest since Feb. 12.
With utilities notching a 1.07 percent gain, it was poised to overtake the health sector, which was down 1.12 percent, as the best performing sector for the year. They are the only two among the 11 major sectors in the black for the year.
Earnings reports were also not encouraging.
Drugstore chain Walgreens Boots Alliance Inc dropped 6 percent, while packaged foods maker Conagra Brands Inc tumbled 15 percent after they reported lackluster sales.
Accenture Plc fell 5.86 percent and cruise operator Carnival Corp dropped 9.34 percent after they gave disappointing forecasts.
Nike Inc dropped 1.65 percent ahead of its second-quarter results expected after markets close.
Declining issues outnumbered advancers for a 3.40-to-1 ratio on the NYSE and a 3.09-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and 160 new lows, while the Nasdaq recorded three new highs and 689 new lows.
Reporting by Medha Singh in Bengaluru; Editing by Shounak Dasgupta