US STOCKS-Wall St drops 2% as recession worries mount

Reuters

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      All three major indexes set for sharp weekly losses
    

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      Costco slips after quarterly gross margins fall
    

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      Indexes down: Dow 2.27%, S&P 2.40%, Nasdaq 2.34%
    

  
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    By Ankika Biswas and Devik Jain
       Sept 23 (Reuters) - Wall Street's main indexes slid more
than 2% on Friday as investors feared the U.S. Federal Reserve's
hawkish policy actions to quell inflation could trigger a
recession and dent corporate earnings.
    The Dow  .DJI  was briefly down more than 20% from its Jan.
4 record all-time closing peak of 36,799.64 points. A close of
20% or more below that level would confirm the blue-chip index
was in a bear market, according to a widely used definition. The
S&P 500  .SPX  and the Nasdaq  .IXIC  are already in a bear
market.  urn:newsml:reuters.com:*:nL4N30U2D3
    The S&P 500 and the Nasdaq are also closing in on mid-June
lows - their weakest points of the year - with the benchmark
index now 0.7% away from that grim milestone. The Dow is trading
at November 2020 lows.
    After enjoying hefty gains for last two years, Wall Street
has been rocked in 2022 amid worries about a host of issues
including the Ukraine conflict, China COVID-19 flare ups, energy
crisis in Europe and tightening financial conditions across the
globe.
    A half dozen central banks including in the United States,
Britain, Sweden, Switzerland and Norway delivered rate hikes
this week to fight inflation, but it was the Fed's signal that
it expects high U.S. rates to last through 2023 that caught
markets off guard.  urn:newsml:reuters.com:*:nL1N30T10P
    "Markets are digesting the global central bank hiking and
messaging of 'higher for longer' as inflation fighting is
front-and-center," Mimi Duff, managing director at GenTrust,
said in a note.
    "We are in information-gathering mode at this point – some
of the Fed hike/restrictive actions flow through nearly
immediately (mortgage rates higher for instance), while some
other factors take more time to flow through the economy – like
layoffs, hiring plans, business investment etc."
    Dire outlooks from a handful of companies - most recently
FedEx Corp  FDX.N  and Ford Motor Co  F.N  - have also added to
woes in a seasonally weak period for markets.
    The S&P 500's estimated earnings growth for the third
quarter is at 4.6% down from 5% last week, according to
Refinitiv data.
    "The likelihood of a U.S. recession in 2023 is increasing
given the hawkish Fed. While it is widely understood that
earnings estimates are too high given such recession risk, the
market is unlikely to be able to look through falling earnings,"
Citigroup said in a note.
    Goldman Sachs cut its year-end target for the benchmark S&P
500 index  .SPX  by about 16% to 3,600 points, a 1.9% decline
from current levels.  urn:newsml:reuters.com:*:nL4N30U1ED
    At 12:38 p.m. ET, the Dow Jones Industrial Average  .DJI 
was down 683.65 points, or 2.27%, at 29,393.03, the S&P 500
 .SPX  was down 90.12 points, or 2.40%, at 3,667.87, and the
Nasdaq Composite  .IXIC  was down 259.07 points, or 2.34%, at
10,807.74.
    All the three indexes were set for sharp weekly losses.
    All the 11 major S&P sectors declined, led by a 7% slide in
energy  .SPNY  shares. Banks  .SPXBK  lost 3.5%.
    Rate-sensitive technology and growth stocks dropped with
Alphabet Inc  GOOGL.O , Apple Inc  AAPL.O , Amazon.com  AMZN.O ,
Microsoft Corp  MSFT.O  and Tesla Inc  TSLA.O  down between 1.3%
and 4%.
    Shares of Costco Wholesale Corp  COST.O  shed 2.4% after the
big-box retailer reported a fall in its fourth-quarter profit
margins.  urn:newsml:reuters.com:*:nL4N30T41W
    The CBOE volatility index  .VIX , also known as Wall
Street's fear gauge, rose to a three-month high of 30.87 points.
    Declining issues outnumbered advancers for a 13.09-to-1
ratio on the NYSE and a 6.44-to-1 ratio on the Nasdaq.
    The S&P index recorded no new 52-week high and 144 new lows,
while the Nasdaq recorded seven new highs and 740 new lows.
 (Reporting by Ankika Biswas and Devik Jain in Bengaluru;
Editing by Shounak Dasgupta and Maju Samuel)
 ((Ankika.Biswas@thomsonreuters.com))

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