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Wall Street ends down for third day as growth concerns weigh on tech

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  • Tech stocks down in the wake of the Fed’s latest interest rate move
  • Investors worried about possible recession
  • Darden Restaurants falls on disappointing quarterly turnover
  • JetBlue places lowest lock since March 2020
  • Indices down: Dow 0.35%, S&P 0.84%, Nasdaq 1.37%

Sept 22 (Reuters) – Major Wall Street indices ended Thursday lower, falling for a third straight session as investors reacted to the Federal Reserve’s latest aggressive move to curb inflation by selling growth stocks, including tech companies.

The Fed hiked interest rates by an expected 75 basis points on Wednesday, signaling a longer trajectory for key rates than markets had priced in, fueling fears of further volatility in stock and bond trading in a year that has seen bear markets in both asset classes. read more

The US Federal Reserve’s economic growth projections released on Wednesday were also striking, growing just 0.2% this year, rising to 1.2% for 2023.

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The jitters were already present in the market after a number of companies – most recently FedEx Corp and Ford Motor Co (FN) – gave bleak prospects for earnings.

As of Friday, the S&P 500’s estimated third-quarter earnings growth is 5%, according to data from Refinitiv. Excluding the energy sector, growth is -1.7%.

The S&P 500’s price-to-earnings ratio, a common measure of stock valuation, is 16.8 times earnings – well below the nearly 22 times the price-to-earnings ratio stocks had at the start of the year.

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Nine of the 11 major S&P sectors fell, led by declines of 2.2% and 1.7% respectively in consumer discretionary (.SPLRCD) and financial (.SPSY) shares.

Shares of megacap tech and growth companies like Amazon.com Inc (AMZN.O)Tesla Inc (TSLA.O) and Nvidia Corp (NVDA.O) fell between 1% and 5.3% as benchmark yields on US Treasuries hit an 11-year high.

Rising returns are particularly weighing on the valuations of companies in the technology sector, which have high projected future earnings and make up a significant proportion of market cap-weighted indices such as the S&P 500.

The Technology Sector of the S&P 500 (.SPLRCT) has fallen 28% so far this year, compared to a 21.2% drop in the benchmark index.

“If we continue to have sticky inflation, and if (Fed Chairman Jerome) Powell sticks to his guns, as he points out, I think we’re going into a recession and we’re going to see a significant drop in earnings expectations,” said Mike Mullaney, director of global markets in Boston. Partners.

“If this happens, under those circumstances, I strongly believe we’ll break 3,636,” he added, referring to the mid-June low of the S&P 500, the year’s weakest point.

The Dow Jones Industrial Average (.DJI) fell 107.1 points, or 0.35%, to 30,076.68, the S&P 500 (.SPX) lost 31.94 points, or 0.84%, to 3,757.99 and the Nasdaq Composite (.IXIC) fell 153.39 points, or 1.37%, to 11,066.81.

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Major US airlines – which have seen a rebound amid increased travel as pandemic restrictions end – also went down, with United Airlines (UAL.O) and American Airlines (AAL.O) fall 4.6% and 3.9% respectively. This brought losses over the past three days to 11% for United and 10.6% for American.

JetBlue Airways Corp (JBLU.O)of 7.1% and also recorded a third loss in a row, closing at the lowest level since March 2020.

Darden Restaurants Inc (DRI.N) fell 4.4% after parent company Olive Garden reported poor sales in the first quarter.

Volume on US stock exchanges was 11.39 billion shares, compared to the full-session average of 10.91 billion over the past 20 trading days.

The S&P 500 posted a new 52-week high and 123 new lows; the Nasdaq Composite recorded 18 new highs and 699 new lows.

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Reporting by Sruthi Shankar, Medha Singh, Devik Jain and Ankika Biswas in Bengaluru and David French in New York; Editing by Shounak Dasgupta, Anil D’Silva and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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