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Wall St tumbles as weak consumer confidence stokes growth worries

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Economy 19 minutes ago (Jun 28, 2022 01:47PM ET)

Wall St tumbles as weak consumer confidence stokes growth worries © Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal and Amruta Khandekar

(Reuters) – Wall Street’s main indexes tumbled in midday trading on Tuesday as a sharp drop in consumer confidence brought to the fore growth risks from rising inflation.

The and the shed the initial gains from a rise in bank shares as the latest batch of economic data raised doubts on the U.S. economy’s resilience to withstand hefty interest rate hikes from the Federal Reserve.

The consumer confidence index dropped 4.5 points to a reading of 98.7 in June, a Conference Board survey showed, as consumers anticipated economic growth would weaken significantly in the second half of the year due to rising inflation.

Last week, the University of Michigan said its final consumer sentiment index reading for June fell to a record low, and another report pointed to slowing U.S. business activity this month.

The reports underscore U.S. consumers responding to the slowdown in the economy, coupled with still higher prices, according to Quincy Krosby, chief equity strategist at LPL Financial (NASDAQ:) in Charlottesville, Virginia.

“Clearly, the Fed’s more aggressive path towards curtailing inflationary pressures is affecting how consumers view the short-term economic landscape, which continues to move sharply lower.”

The S&P 500 consumer discretionary sector, along with technology and communication services, which house high-growth stocks, led sectoral declines with falls of about 2% each.

U.S. Treasury yields rose, with the short end of the curve rising above the long end, supporting the Fed’s tough stance on policy tightening. [US/]

The S&P 500 is now on track for the worst start to the year since 1970, with declines of over 19% so far.

At 12:54 p.m. ET the Dow was down 212.52 points, or 0.68%, at 31,225.74, the S&P 500 was down 41.15 points, or 1.06%, at 3,858.96 and the was down 209.33 points, or 1.82%, at 11,315.23.

Morgan Stanley (NYSE:) rose 2.1%, leading gains among big banks including Goldman Sachs (NYSE:), Bank of America (NYSE:) and Wells Fargo (NYSE:). The S&P 500 banks index rose 0.5%.

Shares of Walt Disney (NYSE:) Inc gained 1.3% after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.

Nike Inc (NYSE:) shed 4.5% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.

Occidental Petroleum Corp (NYSE:) climbed 3.4% after Warren Buffett’s Berkshire Hathaway (NYSE:) Inc raised its stake in the shale producer.

The S&P 500 energy sector index rose 2.3% for the third straight day.

Airlines, cruises, casinos and hotels rose after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.

Declining issues outnumbered advancers for a 1.10-to-1 ratio on the NYSE and for a 1.65-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 29 new lows, while the Nasdaq recorded 25 new highs and 77 new lows.

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