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Market Snapshot: Dow falls over 300 points to extend Monday’s sharp losses as recession fears mount

U.S. stock indexes are extending losses on Tuesday after a tough start to the trading week, as recession fears mount and investors struggle to figure out the Federal Reserve’s monetary policy tightening path after better-than-expected economic data in the past few days.

How stocks are trading

S&P 500
SPX,
-1.73%

fell 53 points, or 1.3%, to 3,945.

Dow Jones Industrial Average
DJIA,
-1.32%

lost 314 points, or 0.9%, to 33,640.

Nasdaq Composite
COMP,
-4.98%

dropped 191 points, or 1.7%, to 11,047.

On Monday, the Dow Jones Industrial Average fell 483 points, or 1.4%, to 33947, the S&P 500 declined 73 points, or 1.79%, to 3999, and the Nasdaq Composite dropped 222 points, or 1.93%, to 11240.

What’s driving markets

Wall Street was struggling to rebound from a poor start to the week, after stronger-than-expected U.S. economic data in recent days raised fears about further interest rate rises by the Federal Reserve.

Monday was the worst session in a month, following a robust survey of business condition in the U.S. service sector. Tuesday isn’t offering respite.

Tuesday morning data on the U.S. trade deficit showed it jumping to a four-month high. The approximate 5% increase is a sign of weakening global demand for American goods and services. The deficit grew to $78.2 billion when economists polled by the Wall Street Journal were expecting an $80 billion shortfall.

This followed Friday’s news that the jobs market was showing few signs that the Fed’s attempts to cool the economy by sharply raising borrowing costs were yet to have a dramatic impact.

There’s been nothing on Tuesday to counter the “good news is bad news” market dynamic, according to John Carey, managing director at Amundi US. One theme is “the economic numbers are too good to be good,” he noted.

While others might focus on the big-picture effects of the Fed and higher interest rates, Carey’s concern is whether 2023 corporate earnings estimates may be too rosy. If that pans out, Carey said that could be the “undertow” dragging down markets next year.

Apart from the market’s ongoing worries, Carey noted it’s the end of the year. That means more investors may be making trades to lock in profits or losses for capital gains tax planning purposes. “There’s some house cleaning and reshuffling of the decks, some trading that’s not strictly related to valuation,” he said.

Technical analysts noted that the market’s latest relapse came after it failed once again to break above an established downtrend.

Pointing to a chart of the S&P 500, commentators at the MarketEar.com suggested that much of the recent rally off the mid-October low was powered by those investors short the market scrambling to cover their positions rather than any fundamental bullishness. (See below)

Source: MarketEar

“The crowd did it again, covering shorts in panic. We are once again below that 200 day [moving average on the S&P 500] that got so many people excited and we saw some bears throw in the towel. A close [on Monday] here or lower and things could get ‘dynamic’ to the downside. Don’t forget the market will become less and less liquid as we approach Christmas,” said MarketEar. com.

Companies in focus

Technology stocks slumped Tuesday. Shares of Meta Platforms 
META,
-6.31%

fell 6.3% after Europe’s data watchdog on Tuesday imposed binding decisions concerning the treatment of personal data by the owner of Facebook, Instagram and WhatsApp.

Tesla Inc. 
TSLA,
-2.64%

shares declined by 2.1% after Reuters reported Tesla planned to cut output of its Model Y by more than 20% in its Shanghai plant this month. The company said the media reports were “untrue.”

Textron Inc. 
TXT,
+5.43%

rose Tuesday after the company announced that its Bell business won a U.S. Army development contract for the Future Long-Range Assault Aircraft (FLRAA) program. Shares are up more than 6% in Tuesday morning trading.

AutoZone Inc.
AZO,
-3.93%

 reported better-than-expected revenue and earnings Tuesday, driven by growth in both commercial and retail sales for the seller of automotive replacement parts. Shares are down more than 5%.

Signet Jewelers Ltd. 
SIG,
+19.29%

climbed Tuesday after the company raised its annual sales and earnings outlook for its current fiscal year. Shares are up more than 18%.

Jamie Chisholm contributed reporting to this article.

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