US STOCKS-Wall Street falls on rate hike worries

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By Devik Jain and Amruta Khandekar

May 12 (Reuters) – Wall Street’s main indexes fell in choppy trading on Thursday, weighed down by concerns that aggressive interest rate increases to curb decades-high inflation could tip the economy into recession.

Nine of the 11 major S&P sectors were lower, with utilities leading losses with a 1.7% decline, followed by financial .SPSY, energy .SPNY and technology .SPLRCT shares.

Consumer discretionary .SPLRCD bucked the trend to rise 0.9% as Kate Spade owner Tapestry TPR.N soared 15.1% on expectations of a demand recovery in its key market of China.nL3N2X42R4

Growth stocks Alphabet Inc GOOGL.O, Tesla Inc TSLA.O, Microsoft Corp MSFT.O, Apple Inc AAPL.O and Nvidia Corp NVDA.O fell between 1.1% and 3% and weighed the most on the S&P 500 and the Nasdaq.

“You have the Fed (Federal Reserve) taking liquidity out of the market and that leads to lower valuations for equities. If the Fed starts to maybe change its tone a little bit – we could see a bounce in an equity market,” said Carin Pai, head of portfolio management at Fiduciary Trust International.

“I do think we’re getting to the point where there are some good buying opportunities. The markets still appear to be looking for some stabilization, it’s hard to know exactly where the bottom is.”

Data this week showed U.S. consumer and producer prices moderated in April but were likely to stay hot for a while and keep the Federal Reserve’s foot on the brakes to cool demand. nL2N2X315FnL2N2X32K3

Traders are pricing in a 61% chance of a 75 basis point hike by the Fed in June. IRPR

Investors are worried that surging inflation coupled with the Fed’s policy moves, the war in Ukraine and latest COVID-19 lockdowns in China could spark a global economic slowdown.

The Nasdaq entered bear market territory earlier this year and has now declined more than 29% from its record close in November, while the S&P 500 index has been in sight of the milestone with an over 18% retreat from its all-time closing high on Jan. 3.

If the benchmark index ends more than 20% below its record close, it would confirm a bear market for the first time since the pandemic-driven selloff in March 2020.

At 12:58 p.m. ET, the Dow Jones Industrial Average .DJI was down 228.91 points, or 0.72%, at 31,605.20, the S&P 500 .SPX was down 21.05 points, or 0.53%, at 3,914.13, and the Nasdaq Composite .IXIC was down 13.41 points, or 0.12%, at 11,350.82.

Declining issues outnumbered advancers for a 1.18-to-1 ratio on the NYSE, while advancing issues outnumbered decliners by a 1.24-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 72 new lows, while the Nasdaq recorded 6 new highs and 1,288 new lows.

(Reporting by Devik Jain and Amruta Khandekar in Bengaluru; Editing by Sriraj Kalluvila and Aditya Soni)

((Devik.Jain@thomsonreuters.com))