S&P 500 slumps as rout in retailers, tech bites

© Reuters.

By Yasin Ebrahim

Investing.com -- The S&P 500 slid Tuesday, as a slump in retailers and surging Treasury yields put the squeeze on the growth sectors of the market including tech amid growing fears that further Federal Reserve rate hikes will be needed to cool inflation.

The S&P 500 was down 1.8%, the Dow Jones Industrial Average fell 1.9%, or 638 points, and the Nasdaq Composite slumped 2.2%.

The 10-year Treasury yield rallied to flirt with the 4% handle for the first time since Nov. 10 as investor expectations for a cut this year dwindle and fears grow that the Fed peak level of rates could be higher than expected.

With a March and May hike nearly priced in, the odds of a June hike increased to 59%, compared with 50% last week, according to Investing.com's Fed Rate Monitor Tool. A June hike would lift rates beyond what the Fed previously projected in December.

Investors will look to the Fed’s minutes due Wednesday for further insight into the central bank’s thinking on monetary policy measures.

The surge in rates, meanwhile, continued to pierce through growth sectors including tech, with Apple Inc (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), and Microsoft Corporation (NASDAQ:MSFT) down about 2%.

Sentiment on chip stocks was dented by fresh signs of softer demand amid a report that Intel (NASDAQ:INTC) delayed an order for semiconductors from Taiwan Semiconductor Manufacturing (NYSE:TSM) until next year.

Consumer discretionary, meanwhile, was hurt by a slump in retailers following quarterly results from Home Depot and Walmart – major Dow components –  that flagged concerns about the strength of the consumer.  

Home Depot (NYSE:HD) fell more than 6% after it reported fourth-quarter results that missed on the bottom line, and guided for 2023 earnings a share to decline by a mid-single-digit percentage, compared with Wall Street expectations for flat earnings.

In its post-earnings call, the home improvement retailer said it expected a “moderation in home-improvement demand,” amid “heightened inflation and rising interest rates, a tight labor market and moderating equity and housing markets.”

Walmart (NYSE:WMT) cut intraday losses to trade about flat despite reporting guidance that fell short of expectations, while quarterly results beat on both the top and bottom lines.

The supermarket giant said in an earnings call that while “stubborn inflation” was hurting consumers, it is “gaining share across income cohorts, including at the higher end.”

General Mills (NYSE:GIS) bucked the trend of disappointing outlooks from retailers after upgrading its full-year forecast on revenue and earnings, sending its shares more than 5% higher.

In other news, DocuSign (NASDAQ:DOCU) slumped 10% after UBS downgraded the company to Sell from Neutral amid growth concerns.