US equities rallied on Thursday as recession jitters returned to Wall Street, dampening gains from a fleeting uptick in relief spurred by Bank of England bond purchases.
The S&P 500 plunged 2.3%, while the Dow Jones Industrial Average lost more than 500 points, or about 1.7%. The Nasdaq Composite fell more than 3%.
Technology stocks led the decline as heavily weighted Apple stock (AAPL) lost about 4.8% on concerns over dwindling demand that led to a cut of Bank of America. Analysts warned in a note Thursday that BofA’s research team “expects the demand trajectory to deteriorate”.
Apple’s declines began Wednesday after a report that the tech giant is pulling out plans to increase production of its new iPhones this year after demand for the product fell short of expectations.
Elsewhere in company news, shares of CarMax (KMX) fell nearly 34% after the vehicle buyer reported second-quarter profits that fell short of Wall Street estimates, citing “affordability challenges” weighing on sales.
Bed Bath & Beyond (BBBY) fell 8% on Thursday after the company posted a larger quarterly loss due to ongoing merchandising and inventory inflation and inflationary pressures on the household goods retailer.
In terms of economic data, first-time jobless claims fell to 193,000, the lowest since April in the week ending Sept. 24, from a downwardly revised 213,000 the week before, the Labor Department said Thursday. Economists argued for 215,000 claims, according to consensus estimates prepared by Bloomberg.
Elsewhere, a third reading by the Commerce Department on gross domestic product (GDP) showed US economic activity contracted by 0.6% year-on-year.
The renewed risk-off vote puts all three major averages on pace to give up gains that came after England’s central bank said on Wednesday it would resume bond buying to help stabilize financial and currency markets. Investors celebrated the shift from aggressive policy tightening by officials in recent months. The S&P 500, Dow and Nasdaq were each up about 2%.
EY Parthenon Chief Economist Gregory Daco said in a note that “the lack of proper policy coordination along with the speed and synchronization of rate hikes” represents an “excessive and disorderly tightening of financial conditions.”
“In the UK, the economic outlook has deteriorated recently with the release of Prime Minister Liz Truss’ budget, triggering a market disruption, with government bond yields rising to their highest level since 2010 and the British pound falling to its lowest level. in 37 years,” said Daco.
Following the Bank of England’s intervention on Wednesday – purchasing about £65 billion, or about $69 million, of long-term government bonds – UK 30-year bond yields plunged 100 basis points after hitting a two-decade high.
Meanwhile, US Treasury yields bounced higher on Thursday after rising — then falling — at the fastest pace in decades. On Wednesday, the 10-year Treasury benchmark – a key economic benchmark – briefly touched 4%, reaching a major milestone amid the worst bond sell-off since 1949.
Atlanta Fed President Raphael Bostic said Wednesday that the decision by his colleagues at the central bank across the Atlantic to return to buying bonds does not change his views on US Federal Reserve policy. changed or aroused fears that England’s economic mistakes might overflow.
“I would expect growth to remain below trend, we would see demand for a wider range of products decline and we would start to see labor markets become more rationalized,” Bostic said, adding that if there were fewer vacancies come, civil servants may consider stopping and holding on to that level.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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