Stocks fell on Tuesday as concerns about a possible recession in the U.S. weighed on investor sentiment.
The Dow Jones Industrial Average fell 420 points, or about 1.4%. The S&P 500 dipped 1.5%, and the tech-heavy Nasdaq Composite shed about 1.6%.
Concerns about economic growth are hanging over investors as the U.S. market looks to recover after a rough first half to the year. U.S. Treasury Secretary Janet Yellen and China’s Vice Premier Liu He held a virtual call on Monday stateside to discuss macroeconomic issues.
The benchmark 10-year Treasury yield has declined in recent days even as the Federal Reserve has pledged to aggressively fight inflation. The 10-year yield is now trading close to the 2-year yield, a recession indicator watched by many on Wall Street.
“The US market is all about pricing in a slowdown, and pricing in the fact that the Fed is forced to hike rates into a slowdown,” Allianz chief economic advisor Mohamed El-Erian said on “Squawk Box.”
Markets finished one of the worst halves in decades on Thursday, and major averages posted their fourth week of losses in five despite modest gains during Friday’s trading session.
The outlook for the second half of the year is murky. Credit Suisse strategist Jonathan Golub said in a note to clients on Tuesday that he expects the U.S. to avoid a recession but cut his S&P 500 target for the end of the year to 4,300 from 4,900. The new target would mean Wall Street claws back about half of its losses from the first six months of the year.