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Wall Street stocks steady after heaviest sell-off since 2020

US stocks stabilized on Thursday after the worst sell-off since the beginning of the pandemic, as investors cope with a difficult outlook for global equities, weighed down by inflation and signs of slowing growth.

The S&P 500 fell as much as 1.2 percent in Thursday morning trade but edged up slightly through lunchtime on Wall Street. The tech-heavy Nasdaq Composite gained 1.2 percent. Both gauges had come under heavy selling pressure in the previous session, with the S&P shedding 4 percent in its worst sell-off since June 2020 and the Nasdaq plunging 4.7 percent.

Thursday’s swings reflected investors’ deep uncertainty about the outlook for growth and inflation at a time when central banks, led by the US Federal Reserve, are tapering back stimulus measures that have helped shake the global economy over the past two years to support.

“There was a violent, vicious decline [on Wednesday] and then these rallies follow,” said Patrick Spencer, RW Baird’s vice president of equities. “Volatility is certainly not going away. . . More volatility and weakness lies ahead.”

Disappointing earnings reports over the past few days from major US companies, including retailers Walmart and Target and networks group Cisco, have highlighted how American companies are grappling with headwinds including rising input costs, the war in Ukraine and slowing growth in China .

However, many investors and Wall Street banks continue to assume that the US economy will avoid a sustained contraction in economic output.

“A recession isn’t inevitable, but customers are constantly asking what to expect in stocks if there’s a recession,” said David Kostin, chief US equities strategist at Goldman Sachs, adding that the Wall Street bank said about a Third forecast probability of US recession in next two years.

Still, late Wednesday, JPMorgan lowered its forecast for gross domestic product growth in the second half of this year to an annualized rate of 2.4 percent from a previous 3 percent, citing tightening financial conditions.

“Financial conditions have tightened because, as chairman [Jay] Powell recently said the Fed needs to slow growth,” said Michael Feroli, JPMorgan’s chief US economist.

Long-dated US Treasuries rose in price on Thursday, reflecting growth fears. The price gains pushed the yield on the benchmark 10-year Treasury down 0.04 percentage point to 2.84 percent, from a peak of 3.2 percent last week. Germany’s closely-watched 10-year Bund yield also fell back below 1 percent, a sign investors are seeking safety.

The decline in US yields put pressure on the US dollar. The dollar index, which measures the greenback against six other currencies, slipped 1 percent, while the euro and pound gained 1.2 percent and 1.4 percent, respectively.

Britain’s FTSE 100 index, which is full of exporters benefiting from a weaker pound, led European markets down 1.8 percent on Thursday. The national Stoxx Europe 600 fell by 1.4 percent.

Additional reporting by Primrose Riordan in Hong Kong and Naomi Rovnick in London

Wall Street stocks steady after heaviest sell-off since 2020 Source link Wall Street stocks steady after heaviest sell-off since 2020

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