Wall Street Ends Down For Third Day As Growth Concerns Weigh On Tech

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Summary
Companies

Tech stocks down in aftermath of Fed's latest rate move
Investors concerned about possibility of recession
Darden Restaurants falls on downbeat quarterly sales
JetBlue posts lowest close since March 2020
Indexes down: Dow 0.35%, S&P 0.84%, Nasdaq 1.37%

Sept 22 (Reuters) - Major Wall Street indexes ended lower on Thursday, falling for a third straight session as investors reacted to the Federal Reserve's latest aggressive move to rein in inflation by selling growth stocks, including technology companies.The Fed lifted rates by an expected 75 basis points on Wednesday and signaled a longer trajectory for policy rates than markets had priced in, fuelling fears of further volatility in stock and bond trading in a year that has already seen bear markets in both asset classes. read more

The U.S. central bank's projections for economic growth released on Wednesday were also eye-catching, with growth of just 0.2% this year, rising to 1.2% for 2023.Jitters were already present in the market after a number of companies - most recently FedEx Corp and Ford Motor Co (F.N), opens new tab - issued dire outlooks for earnings.As of Friday, the S&P 500's estimated earnings growth for the third quarter is at 5%, according to Refinitiv data. Excluding the energy sector, the growth rate is at -1.7%.The S&P 500's forward price-to-earnings ratio, a common metric for valuing stocks, is at 16.8 times earnings - far below the nearly 22 times forward P/E that stocks commanded at the start of the year.

Forward PE for the index has come down but is still above the long-term average

Nine of the 11 major S&P sectors fell, led by declines of 2.2% and 1.7%, respectively, in consumer discretionary (.SPLRCD), opens new tab and financial (.SPSY), opens new tab stocks.Shares of megacap technology and growth companies such as Amazon.com Inc (AMZN.O), opens new tab, Tesla Inc (TSLA.O), opens new tab and Nvidia Corp (NVDA.O), opens new tab fell between 1% and 5.3% as benchmark U.S. Treasury yields hit an 11-year high. Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in New York

Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in New York

Item 1 of 2 Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar/File Photo[1/2]Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar/File Photo Purchase Licensing Rights, opens new tabRising yields weigh particularly on valuations of companies in the technology sector, which have high expected future earnings and form a significant part of the market-cap weighted indexes such as the S&P 500.The S&P 500 tech sector (.SPLRCT), opens new tab has slumped 28% so far this year, compared with a 21.2% decline in the benchmark index."If we continue to have sticky inflation, and if (Fed Chair Jerome) Powell sticks to his guns as he indicates, I think we enter recession and we see significant drawdown on earnings expectations," said Mike Mullaney, director of global markets at Boston Partners."If this happens, I have high conviction under those conditions that we break 3,636," he added, referring to the S&P 500's mid-June low, its weakest point of the year.The Dow Jones Industrial Average (.DJI), opens new tab fell 107.1 points, or 0.35%, to 30,076.68, the S&P 500 (.SPX), opens new tab lost 31.94 points, or 0.84%, to 3,757.99 and the Nasdaq Composite (.IXIC), opens new tab dropped 153.39 points, or 1.37%, to 11,066.81.Major U.S. airlines - which have enjoyed a rebound amid increased travel as pandemic restrictions end - were also down, with United Airlines (UAL.O), opens new tab and American Airlines (AAL.O), opens new tab falling 4.6% and 3.9% respectively. This took losses in the last three days to 11% for United and 10.6% for American.JetBlue Airways Corp (JBLU.O), opens new tab, off 7.1% and also recording a third straight loss, closed at its lowest level since March 2020.Darden Restaurants Inc (DRI.N), opens new tab slid 4.4% after the Olive Garden parent reported downbeat first-quarter sales.Volume on U.S. exchanges was 11.39 billion shares, compared with the 10.91 billion average for the full session over the last 20 trading days.The S&P 500 posted one new 52-week high and 123 new lows; the Nasdaq Composite recorded 18 new highs and 699 new lows.

Reporting by Sruthi Shankar, Medha Singh, Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Anil D'Silva and Deepa Babington

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