news/GOOG/2023.02.21/Wall St posts worst day of 2023 on higher-for-longer rate fears.txt

(For a Reuters live blog on U.S., UK and European stock
markets, click or type LIVE/ in a news window.)*Biggest daily falls on Wall St since Dec. 15*Home Depot falls as FY profit forecast disappoints*Big tech stocks hit in widespread decline*U.S. business activity expands for first time in 8 months*Indexes down: Dow 2.06%, S&P 2%, Nasdaq 2.5%Feb 21 (Reuters) -Wall Street posted its worst performance of the year on
Tuesday, with the main benchmarks ending down as investors
interpreted a rebound in U.S. business activity in February to
mean interest rates will need to stay higher for longer to
control inflation.For the S&P 500 and Nasdaq Composite, it
was their third session in a row closing lower, while the
decline in the Dow Jones Industrial wiped out its gains
for 2023.The falls came after the S&P Global Purchasing
Manufacturer's index, which reflects business activity in the
United States, returned to expansion for the first time in eight
months in February. The 50.2 reading, up from 46.8 in January,
was buoyed by a robust services sector, according to a survey.The report added to a recent slew of economic data which has
painted a picture of a resilient economy, which continues to
perform against a backdrop of multiple rate-rises by the central
bank in 2022 aimed at tamping down inflation.With inflation still far from the Fed's 2% target, and the
economy retaining much of its vigor, money market participants
have been revising upwards where they see the Fed fund rates
peaking - currently at 5.35% in July and staying near those
levels throughout the year."Today, the realization is that the Fed is not kidding
around about higher for longer, and in fact it might be a little
bit higher for a little-to-a-lot bit longer," said Carol
Schleif, chief investment officer at BMO Family Office.U.S. stocks had an upbeat start to the year after their
worst annual showing in more than a decade in 2022, as investors
hoped the central bank's rate-hike cycle was nearing its end.
Such positivity makes equity markets susceptible to pull-backs
though, when data undermines such expectations."The market keeps looking for a dovish pivot, and they are
just not going to get it," said Schleif.Investors will look to the minutes detailing discussion at
the Fed's last policy meeting, due out on Wednesday, for further
clues on attitudes within the central bank on rates.The Dow Jones Industrial Average fell 697.1 points,
or 2.06%, to 33,129.59, the S&P 500 lost 81.75 points, or
2.00%, to 3,997.34 and the Nasdaq Composite dropped
294.97 points, or 2.5%, to 11,492.30.Among those hit by Tuesday's widespread declines were big
tech stocks, with Tesla Inc, Amazon.com Inc,
Microsoft Corp and Google-parent Alphabet Inc
all falling between 2.1% and 5.3%.Not helping them was the fact the U.S. benchmark 10-year
Treasury notes hit a fresh three-month high.Higher yields typically weigh on growth stocks, whose
valuations tend to be based on future profits that are
discounted heavily as rates go higher.The semiconductor index was also impacted, dropping
3.3%.Elsewhere, Home Depot Inc slumped 7.1% to a
three-month low after the No. 1 domestic home improvement chain
warned of weakening demand and issued a dour profit forecast for
2023.Smaller rival Lowe's Cos Inc fell 5.1% ahead of its
results next week.Walmart forecast full-year earnings below estimates
and painted a grim picture of hotter-than-expected food
inflation squeezing profit margins. However, the world's largest
retailer rose 0.6%.All of the major 11 S&P 500 sectors fell, with the consumer
discretionary index's 3.3% decline leading the way.Volume on U.S. exchanges was 11 billion shares, compared
with the 11.62 billion average for the full session over the
last 20 trading days.The S&P 500 posted two new 52-week highs and one new
low; the Nasdaq Composite recorded 57 new highs and 112 new
lows.
(Reporting by Johann M Cherian and Medha Singh in Bengaluru and
David French in New York; Editing by Marguerita Choy and Anil
D'Silva)