S&P 500 plunges 4% in biggest daily drop in two years

The main U.S. stock market indexes plunge sharply on Wednesday. The Dow Jones falls 3.57% to 31,490.07 points. This is its biggest daily decline since June 11, 2020, when it plunged 6%.

On the other hand, the S&P 500 recorded a 4.04% decline to 3,923.68 units, setting a new annual low. The index had not experienced a daily drop of such magnitude since June 11, 2020, when it plunged 5.89%.

Finally, the Nasdaq Composite lost 4.73% to 11,418.15, its worst day since May 5, and the Nasdaq 100 fell 5.06% on Wednesday to 11,928.31 points. Interestingly, on May 5, it also fell 5.06%.

Year-to-date, the Nasdaq 100 is down 26.91%; the S&P 500 is down 17.72% and the Dow Jones is off 13.34%.

In some of his most hawkish comments to date, Federal Reserve Chairman Jerome Powell said Tuesday that the U.S. central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Meanwhile, Chicago Fed President Charles Evans said Wednesday that he sees a half-point rate hike at next month’s meeting and “probably beyond,” according to Bloomberg.

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Inflation, retail sales, margins….

“Stocks are getting hammered as inflation fears and weak earnings weigh on market sentiment,” said Fiona Cincotta of City Index. “While strong retail sales helped boost stocks yesterday, disappointing quarterly figures from retail giants Target and Lowe’s are instilling fear in the market today. Yesterday’s data suggests that consumers are weathering the inflation blow for now. However, retailers are not faring as well in navigating rising input costs,” Cincotta said in remarks to Bloomberg.

“Concerns about inflation and a hawkish Fed are nothing new, but add in worries about profit margins and the impact of inflation on the consumer and you have a recipe for a big down day,” Ryan Detrick, chief strategist at LPL Financial, wrote in a note to clients.

On the other hand, “what we’re seeing this week from big retailers could be a clue to recession in the broader markets,” noted Mike Bailey, director of research at FBB Capital Partners. “We’re seeing consumers vote with their portfolios on what they value most, and we’re seeing winners and losers emerge.”