Wall Street sank back to where it was in May, pulled down by steep drops in several Big Tech companies.
The S&P 500 fell 1.4% Wednesday after rising bond yields tightened their chokehold on the stock market and some of the most influential companies turned in mixed profit reports. The Dow lost 105 points, and the tech-heavy Nasdaq composite dropped 2.4%.
Alphabet is another one of Wall Street’s biggest companies and, like Microsoft, a member of the “Magnificent Seven” group of Big Tech stocks that’s accounted for a disproportionate amount of the S&P 500’s gain this year. The Dow was holding up better than other indexes because it includes Microsoft but not Alphabet.
The 10-year yield earlier this week hit its highest level above 5% since 2007, and high yields knock down prices for stocks and other investments while slowing the overall economy and adding pressure to the financial system. Investors banking on rate cuts may be depending on a playbook that’s become obsolete, said Bryant VanCronkhite, senior portfolio manager at Allspring Global Investments. He said that may be pushing them to not take seriously enough the possibility of a global recession, which would be the result of rates left too high for too long.
“Their focus is going to be on inflation first, economy second, in my mind. As a result, I don’t think they’ll respond quickly. In fact, I think the Fed wants a recession.”
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