US STOCKS-Wall St slips in choppy trading on rising recession worries

By Ankika Biswas and David French

Dec 7 (Reuters)Wall Street’s main indexes struggled for direction on Wednesday, bouncing around in choppy trading as investors weighed potential recession fears linked to the pace of the Federal Reserve’s monetary policy tightening and its effects on corporate America.

The benchmark S&P 500 .SPX fell for the fifth straight session on Wednesday.

The Nasdaq .IXIC was down for the fourth straight session, dragged lower by a 1.3% drop in Apple Inc AAPL.O on Morgan Stanley’s iPhone shipment target cut and a 3.5% fall in Tesla Inc .IXIC over production loss worries.

Markets have also been rattled by downbeat comments from top executives at Goldman Sachs Group Inc GS.N, JPMorgan Chase & Co JPM.N and Bank of America Corp BAC.N on Tuesday that a mild to more pronounced recession was likely ahead.

Fears that the U.S. central bank might stick to a longer rate-hike cycle have intensified recently in the wake of strong jobs and service-sector reports.

More economic data, including weekly jobless claims, producer price index and the University of Michigan’s consumer sentiment survey this week, will be on the watch list for clues on what to expect from the Fed on Dec. 14.

“When they (investors) take a look at what earnings estimates are for the remainder of 2022 and for 2023, they have not considered a recession in 2023,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

“There’s some adjustment to what earnings estimates will be over the next 12 months and I think that’s what’s providing a little bit of pressure to the markets.”

The CBOE volatility index .VIX, also known as Wall Street’s fear gauge, rose to a two-week high before slipping back slightly.

Money market participants see a 91% chance that the Fed will increase its key benchmark rate by 50 basis points in December to 4.25%-4.50%, with rates peaking in May 2023 at 4.93%. FEDWATCH

By 2:21 p.m. ET (1921 GMT), the Dow Jones Industrial Average .DJI fell 23.81 points, or 0.07%, to 33,572.53, the S&P 500 .SPX lost 9.85 points, or 0.25%, to 3,931.41 and the Nasdaq Composite .IXIC dropped 54.80 points, or 0.5%, to 10,960.09.

Concerns about a steep rise in borrowing costs have boosted the dollar, but dented demand for risk assets such as equities this year. The S&P 500 is on track to snap a three-year winning streak, down 17.5% so far in 2022.

Four out of 11 major S&P sector indexes were higher, with healthcare shares .SPXHC leading the pack, while technology .SPLRCT and communication services stocks .SPLRCL were among the worst performers.

Energy .SPNY fell 0.6% and was on course for its fifth straight decline. The sector’s performance was weighed by U.S. crude prices CLc1 falling again, at one point trading at its lowest intraday level since late December 2021.

Carvana Co CVNA.N was down 40.1% after Wedbush downgraded the used-car retailer’s stock to “underperform” from “neutral” and slashed its price target to $1.

Meanwhile, United Airlines UAL.O traded 2.5% lower. Unions representing various workers at the airline said they would join forces on contract negotiations.

Travel-related stocks were generally down. Delta Air Lines DAL.N and American Airlines Group AAL.O were 3% and 4.1% lower respectively, with cruise line operators Carnival Corp CCL.N and Norwegian Cruise Line Holdings NCLH.N and accommodation-linked Airbnb Inc ABNB.O and Booking Holdings BKNG.O all falling between 1.5% and 3.7%.

(Reporting by Shubham Batra, Ankika Biswas, Johann M Cherian and Shashwat Chauhan in Bengaluru and David French in New York; Editing by Vinay Dwivedi, Shounak Dasgupta and Lisa Shumaker)

((Shubham.Batra@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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