(Bloomberg) — Declines in US stocks resumed in early trading on Thursday, after growing concern that inflation is cutting into corporate performance erased $1.5 trillion from the market value of companies in the S&P 500 in the prior session. Treasuries extended gains.
The benchmark equity index extended losses to 1%, after the biggest single-day drop since June 2020 on Wednesday. The tech-heavy Nasdaq 100 also turned lower.
Treasury yields retreated about nine basis points as investors sought insurance against further declines in risk assets, with the Federal Reserve set on taming inflation via rate hikes and a shrinking balance sheet beginning in June.
Bets that robust earnings can help investors weather this year’s turbulence were thrown in doubt after US consumer titans signaled growing impact of high inflation on margins and consumer spending. Meanwhile, Fed officials reaffirmed that tighter monetary policy lies ahead, and investors fretted over stagflation risks.
The Stoxx Europe 600 retreated about more than 2%, with all industry sectors in the red and personal care and food and beverages leading the decline. Stocks of retailers and consumer-discretionary companies posted some of the biggest losses in Asia and Europe after US investors questioned the lofty valuations of companies like Target Corp. against the backdrop of rising interest rates.
“We remain concerned that the inflationary environment will see consumers rein in spending and see further risks in consumer-exposed sectors which aren’t being fully priced in yet,” said James Rutherford, head of European equities at Federated Hermes Ltd. “Inflationary pressure on company margins is also a growing — and underestimated — risk. We therefore remain focused on companies with high revenue visibility and strong pricing power.”
In China, Tencent Holdings Ltd. plunged 6.5% after warning it will take time for Beijing to act on promises to prop up the Chinese tech sector. Cisco Systems Inc. slid in extended US trading on a disappointing revenue outlook.
On the commodities front, crude oil extended declines, while industrial metals were mixed as global growth fears damped the demand outlook. Copper held near a seven-month low.
Elsewhere, the Swiss franc extended its advance versus the dollar after Swiss National Bank President Thomas Jordan said policy makers are ready to act against inflation.
And in emerging markets, Sri Lanka fell into default for the first time in its history as the government struggles to halt an economic meltdown that prompted mass protests and a political crisis. An index of developing-nation stocks slumped more than 2%.
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Some of the main moves in markets:
Stocks
- The S&P 500 fell 1% as of 9:48 a.m. New York time
- The Nasdaq 100 fell 0.9%
- The Dow Jones Industrial Average fell 1.4%
- The Stoxx Europe 600 fell 2.1%
- The MSCI World index fell 1.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.8%
- The euro rose 0.9% to $1.0562
- The British pound rose 1.1% to $1.2472
- The Japanese yen rose 0.8% to 127.24 per dollar
Bonds
- The yield on 10-year Treasuries declined nine basis points to 2.79%
- Germany’s 10-year yield declined 10 basis points to 0.93%
- Britain’s 10-year yield declined five basis points to 1.81%
Commodities
- West Texas Intermediate crude fell 0.9% to $108.59 a barrel
- Gold futures rose 0.9% to $1,838.20 an ounce
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