S&P 500 decreases by 1% as investors gauge chances of economic slowdown

June 10, 2022: -On Wednesday, Stocks decreased as investors monitored signs of a potential economic slowdown and kept an eye on the bond market.

The Dow Jones Industrial Average is clearing 269.24 points, or 0.81%, to close at 32,910.90. The S&P 500 sliding 1.08% to finish at 4,115.77, while Nasdaq Composite decreases 0.73% to 12,086.27.

The moves come as investors weigh updates from significant companies and signs that economic growth may be slowing.

The traded U.S. shares of Credit Suisse decreased 1% after the bank issued a profit warning for the second quarter, which cited tighter monetary policy and the war in Ukraine. At an industry conference, Intel declined more than 5% after management warned of weakening semiconductor demand.

However, the Atlanta Federal Reserve’s GDPNow tracker shows a growth rate of 0.9% for the second quarter, down from 1.3% in the previous week. According to the Mortgage Bankers Association, mortgage demand reached its lowest level in 22 years in the previous week.

On Wednesday, Deutsche Bank chief U.S. economist Matthew Luzzetti, who reached for a recession by 2023, said in a note to clients that the odds for a recession are likely to rise.

“Our main conclusion is that forward-looking recession probabilities are looking far more sinister later this year as financial conditions tighten,” Luzzetti wrote.

As the Fed keeps tightening monetary conditions, the concerns about economic growth and corporate earnings could have a more significant impact on stocks, Allianz chief financial advisor Mohamed El-Erian said on CNBC.

“The markets have been taking this news much better than they would have otherwise, but if I were completely invested right now, I’d take some chips off the table. I would wait for more value to be created,” El-Erian said.

On Wednesday, action in the bond market may have hurt investor sentiment, as the 10-year Treasury yield increased back over 3%. The price of oil surged, with U.S. benchmark West Texas Intermediate crude pushing well above $120 per barrel.

The energy was a bright spot for the market, as the sector closed at its highest level since August 2014. Chinese tech stocks supported the Nasdaq, with the U.S.-traded shares of JD.com and Pinduoduo increasing about 7.7% and 9.7%, respectively.

Elsewhere, shares of Robinhood decreased 3.9% after Securities and Exchange Commission Chair Gary Gensler detailed potential rule changes around trade execution, possibly requiring retail orders to be routed into auctions. Moderna increased about 2.2% after its modified Covid-19 booster shot showed a more robust response to new variants.

Campbell Soup increased by about 1.5% on the earnings front after a stronger-than-expected quarterly report. Investors are looking toward the consumer price index reading for May.