S&P 500 Turns Negative After Giving Up Gains as Consumer, War Worries Weigh

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Investing.com – The S&P 500 gave up intraday gains Friday, to remain on course for its another weekly loss amid rising concerns about the strength of the consumer in the wake of the Russia-Ukraine war and expectations for the Federal Reserve to begin its tightening cycle next week.

The S&P 500 fell 0.6%, the Dow Jones Industrial Average fell 0.1%, or 43 points, the Nasdaq fell 1.4%.

Consumer discretionary stocks led the broader market lower as investors digested data pointing to a wobble in consumer sentiment in the wake of surging inflation that ratcheted up a notch following the Russia-Ukraine war.  

Tesla (NASDAQ:TSLA), Las Vegas Sands (NYSE:LVS), and Etsy Inc (NASDAQ:ETSY) led the losses in consumer discretionary stocks, with the latter falling by more than 9%.

The March University of Michigan Consumer Sentiment index, which is negatively correlated with inflation, fell to 59.7 from 62.8, the lowest level since September 2011.

“This latest leg down [in the survey] surely reflects the recent spike in gasoline prices since the beginning of the Russia-Ukraine war,” Jefferies said in a note.

Signs of weakness in consumer, which is a key driver of economic growth, overshadowed growing hopes of a Ukraine-Russia agreement on a ceasefire after Russian President Vladimir Putin reportedly signaled positive developments in peace talks with Ukraine.

President Joe Biden continued to up the ante on Moscow, calling on lawmakers to revoke Russia’s “most favored nation” status, which could end normal trade with Russia, leading to higher tariffs.

Technology gains a day earlier proved short-lived as the sector resumed its selloff. Big tech as mostly in the red, with Apple (NASDAQ:AAPL) and Meta Platforms (NASDAQ:FB) the biggest decliners.

Meta was also pressured by concerns that user growth could slow even further after Russia restricted access to the social media giant’s Instagram platform and launched a criminal probe in the company.

The investigation was opened after the social media giant changed its policy on hate speech to allow statements such as “death to Russian invaders” on its platforms.

The weakness in the broader market comes just a week ahead of the Federal Reserve’s two-day meeting, which gets underway on March 15.

Ahead of the meeting, Federal Reserve Chairman Jerome Powell has backed a quarter point rate hike and said that the Fed would likely begin talks about how to reduce its balance sheet.

“Chairman Jay Powell will be walking a tightrope, balancing the needs to raise rates and rein in a more systemic rise in inflation with the need to avert a meltdown in credit markets,” said Diane Swonk, chief economist at Grant Thornton.