US stocks slide on concerns over recovery, corporate tax hikes

WALL Street lost ground on Tuesday as economic uncertainties and the increasing likelihood of a corporate tax rate hike dampened investor sentiment and prompted a broad sell-off despite signs of easing inflation.

The Dow Jones Industrial Average fell 292.06 points or 0.84% to 34,577.57; the S&P 500 lost 25.68 points or 0.57% at 4,443.05; and the Nasdaq Composite dropped 67.82 points or 0.45% to 15,037.76.

Optimism faded throughout the session, reversing an initial rally following the Labour Department’s consumer price index report. All three major US stock indexes ended in negative territory in a reminder that September is a historically rough month for stocks.

So far this month the S&P 500 is down nearly 1.8% even as the benchmark index has gained over 18% since the beginning of the year.

“There is a possibility that the market is simply ready to go through an overdue correction,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “From a seasonality perspective, September tends to be the window dressing period for fund managers.”

The advent of the highly contagious Delta COVID variant has driven an increase in bearish sentiment regarding the recovery from the global health crisis, and many now expect a substantial correction in stock markets by the end of the year.

“We’re still in a corrective mode that people have been calling for months,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “Economic data points have been missing estimates, and that has coincided with the rise in the Delta variant.”

The CPI report delivered a lower-than-consensus August reading, a deceleration that supports Federal Reserve Chairman Jerome Powell’s assertion that spiking inflation is transitory and calms market fears that the central bank will begin tightening monetary policy sooner than expected.

US Treasury yields dropped on the data, which pressured financial stocks, and investor favour pivoted back to growth at the expense of value.

The long expected corporate tax hikes, to 26.5% from 21% if Democrats prevail, are coming nearer to fruition with US President Joe Biden’s US$3.5 tril budget package inching closer to passage.

All 11 major sectors in the S&P 500 ended the session red, with energy and financials suffering the largest percentage drops.

Declining issues outnumbered advancing ones on the NYSE by a 2.25-to-1 ratio; on Nasdaq, a 2.40-to-1 ratio favoured decliners.

The S&P 500 posted two new 52-week highs and two new lows; the Nasdaq Composite recorded 50 new highs and 107 new lows.

Volume on US exchanges was 10.07 billion shares compared with the 9.38 billion average over the last 20 trading days. – Sept 15, 2021

Share on facebook
Share on twitter
Share on whatsapp
Share on email

Subscribe and get top news delivered to your Inbox everyday for FREE

Latest News