U.S. stocks gave up early gains to turn sharply lower Tuesday after a batch of weak U.S. economic data stoked fears about the outlook for corporate profits. What’s happening
The Dow Jones Industrial Average
DJIA,
-1.49%
was down 425 points, or 1.4%, at 31,015.
The S&P 500
SPX,
-1.93%
fell 69 points, or 1.8%, to 3,830.
The Nasdaq Composite
COMP,
-2.77%
dropped 301 points, or 2.6%, to 11,223.
On Monday, major indexes drifted to a modestly lower close. The S&P 500, which recently slid into a bear market, is down 19.6% year to date.
What’s driving markets U.S. investors were forced to confront a handful of weak economic data, which helped to stoke fears about the outlook for corporate profits and guidance. Expectations for S&P 500 corporate earnings over the coming year have remained surprisingly robust this year, analysts said, leaving room for companies to share disappointing earnings and guidance when the second-quarter earnings season begins next month. On Tuesday, the Conference Board’s consumer-confidence index dropped in June to a 16-month low of 98.7, as Americans grew more worried about high gas and food prices and the health of the economy. Economists polled by The Wall Street Journal had forecast the index to drop to 100 from a revised 103.2 in May. Meanwhile, the Richmond Fed Manufacturing Index came in at -19, the lowest reading since May 2020. These data reminded investors about the possibility that the U.S. economy might already be in a recession — something that ARK Invest’s Cathie Wood discussed during a television interview Tuesday morning. “There’s some nervousness that companies will miss their numbers or deliver negative guidance,” said Steve Sosnick, chief strategist at Interactive Brokers. “Earnings expectations haven’t really been lowered in the face of economic news that seems to dictate that we should [lower expectations]. And the market is going to have to reconcile this over the next month or so,” he added. According to FactSet, analysts expect earnings for S&P 500 companies to grow by 4.3% during the second quarter, which would be the lowest quarterly earnings growth since the fourth quarter of 2020. Growth expectations have been revised lower this year, having decreased by one percentage point since March. Another analyst warned that p …