US stocks fell on Thursday, with major averages close to posting sharp declines for June and the first half of 2022 as fears of rising inflation and the prospect of a recession weighed on risky assets.
The S&P 500 fell about 1% after the market opened for the third consecutive day of losses. The Dow was down more than 300 points, or 1.1%, and the Nasdaq was down about 1.3%.
Stocks remained lower in early trade after a new report showed that core personal consumption expenditures – the Fed’s preferred inflation measure – slowed slightly more than expected in May. That metric is up 4.7% from a year ago compared to an expected 4.8% increase, according to Bloomberg data. Headline inflation, which includes energy and food price changes, also rose slightly less than expected, or at an annual rate of 6.3% to match April’s pace. However, separate data showed real personal spending fell by a larger-than-expected 0.4% in May after a 0.7% rise in April, suggesting consumers are pulling back on some spending with inflation at current levels.
The risk aversion mood in equities has extended to other asset classes including oil. West Texas Intermediate crude futures fell again below $110 a barrel, and bitcoin prices fell to just over $19,000.
Thursday’s price action extended a series of declines in US stocks. These have been hit hard for months now as investors weigh persistently severe inflation against the risks of deflation, as the Federal Reserve responds to inflation with faster tightening. Federal Reserve Chairman Jerome Powell emphasized this week that the central bank’s main goal is to bring down the rate of inflation at its fastest rate in more than 40 years, suggesting that this goal will take priority over fully maintaining activity elsewhere in the economy.
“Certainly there is a risk,” Powell said at the European Central Bank’s annual Economic Policy Roundtable in Portugal on Wednesday. “The biggest mistake we make — to put it this way — would be to fail to restore price stability .”
Powell suggested earlier in June that a 50 or 75 basis point rate hike would likely be on the table after the Fed’s July meeting. In the weeks that followed, a number of other key central bank officials emphasized that the latter option would likely be the most appropriate option, with inflation and consumer inflation expectations remaining high.
Amid the myriad concerns facing the markets lately, stocks are on track to close out the worst first half of the year in decades. Based on Wednesday’s closing prices, the S&P 500 is set to post a 19.9% drop for the first six months of the year — its worst performance since 1970. For June alone, the index is on track to fall 7.6%.
All 11 major sectors in the index are heading for monthly losses, with the cyclical energy, materials and financial sectors among the worst performers as renewed fears about a recession. That leadership also mirrored what was seen earlier this year, when energy stocks outperformed amid rising oil and other energy commodity prices. The most defensive healthcare, consumer goods and utilities sectors outperformed in June.
The Dow and Nasdaq Composite indices also headed for significant losses both on a monthly basis and on an annual basis. As of Thursday’s close, the Dow is down 14.6% in the first half of the year, and the Nasdaq is down nearly 29%.
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bed bath behind (BBBY) Shares extended losses after dropping more than 23% on Wednesday. The retailer reported same-store sales that sank more than 20% last quarter, and also announced that CEO Mark Triton will leave the company and the board, effective immediately, and board member Sue Goff will take over on a temporary basis.
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RH (R) Shares fell after the furniture company cut its full-year forecast to forecast lower revenue, citing a “deteriorating macroeconomic environment” and lower-than-expected demand. RH now sees revenue fall between 2% and 5% this year, versus previous sales forecasts of 2%.
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Constellation brands (STZ) It fell even after the beverage company released first-quarter results that beat estimates in most major metrics. Comparative earnings per share came in at $2.66 versus the expected $2.50, according to Bloomberg data, and beer net sales of $1.9 billion were $160 million better than expected.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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