US stocks slide as weak earnings and strong data take their toll

Wall Street stocks tumbled on Thursday as a round of upbeat economic data bolstered expectations that the Federal Reserve will continue to sharply raise borrowing costs to combat inflation.

The gloom was deepened by weak earnings news, including from chipmaker Micron Technology, which announced plans to cut 10 percent of its workforce amid weaker demand, while used car dealer CarMax said it was pausing buybacks and cutting costs after third-quarter net profit fell 4/5.

The S&P 500 closed 1.4% lower after falling nearly 3% earlier. The tech-heavy Nasdaq Composite fell 2.2%. The S&P 500 is down a fifth this year, according to Refinitiv data, giving Wall Street’s blue-chip benchmark its worst year since the 2008 financial crisis.

Thinner year-end trading conditions were also a factor behind the sharp drop as the holidays approached.

“Nobody wants exposure to the market at this point, everyone is just trying to close out the year,” said Jim Tierney, chief investment officer for US growth at fund manager AllianceBernstein.

He added: “The big deal in 2023 will be now that the Fed has done its job, what does that mean for earnings growth?”

The Micron news sent a host of semiconductor-related stocks down, including Nvidia, which fell 7%. Elsewhere, Tesla was another big loser, falling 8.9% on news that the automaker had increased the discount it was offering on some models. That raised concerns that it is also facing weakening demand.

Before markets opened, third-quarter U.S. gross domestic product growth was unexpectedly revised to an annualized rate of 3.2%, from 2.9% in November. Weekly initial jobless claims were also lower than expected at 216,000, below economists’ expectations of 222,000.

Upward revision”[confirmed] “The Fed’s assertion that the economy is indeed on strong enough ground to endure restrictive monetary policy for some time,” said Ian Lyngen, head of US rate strategy at BMO Capital Markets. long”.

Wall Street’s decline at the start of the session hit European stocks, which had previously oscillated between losses and small gains. The Stoxx Europe 600 is down 1%, while the UK’s FTSE 100 abandons previous gains to trade 0.4% lower. Earlier, MSCI Asia Pacific rose 0.8%, recovering some equilibrium after the Bank of Japan shocking decision on Tuesday to ease policy keeping bond yields near zero.

Signs of US economic strength also dampened demand for interest-sensitive short-term government debt. The yield on the two-year Treasury note rose slightly to 4.28%.

Long-term government debt remains stable after being shaken by the BoJ’s surprise move. Yields on 10-year US Treasuries were mostly flat at 3.69%, while yields in the eurozone and UK rose slightly.

In money markets, sterling fell after data showed the UK economy shrank 0.3% more than expected in the third quarter compared with the previous three-month period. The pound traded 0.4% lower against the dollar at $1.203.

Investec economist Ellie Henderson said the figures suggested the UK recession could come sooner than expected.

“The question now is whether the economy can achieve growth in [the fourth quarter] and avoid a recession at the end of the year,” she said.

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