US STOCKS-Wall Street set to extend declines on rate hike concerns

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By Devik Jain and Amruta Khandekar

May 12 (Reuters) – Wall Street’s main indexes were set to open lower on Thursday, with growth stocks leading declines as investors worried that aggressive interest rate increases to curb decades-high inflation could tip the economy into recession.

Megacap stocks Meta Platforms FB.O, Microsoft Corp MSFT.O, Google-owner Alphabet Inc GOOGL.O, Apple Inc AAPL.O, Amazon.com AMZN.O and Tesla Inc TSLA.O slipped between 1.2% and 4.7% in premarket trading.

Chipmakers Intel Corp INTC.O, Advanced Micro Devices AMD.O and Nvidia Corp NVDA.O were down 0.9% to 2.8%.

The tech-heavy Nasdaq index .IXIC slumped more than 3% on Wednesday, after data showed U.S. consumer 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. nL2N2X315F

A Labor Department report on Thursday showed the producer price index (PPI) for final demand rose 0.5% in April compared with a 1.6% increase in March. Economists had forecast the PPI gaining 0.5% for the month. nL2N2X32K3

“What we’re seeing is that inflation is starting to slow down but the velocity was not as fast as people had hoped. So I think markets are still scared about that,” said Gene Goldman, chief investment officer at Cetera Investment Management.

“There’s really a lot of uncertainty around the Fed right now. If they are too aggressive, that hurts economic growth, but (if) they’re too conservative, higher inflation hurts consumption, which also hurts growth.”

Growth stocks, which led Wall Street’s rally from the pandemic lows in 2020, have borne the brunt of a selloff this year as their returns and valuations are discounted more deeply when rates go up.

The S&P 500 growth index .IGX has dropped 25.6% so far this year, a much larger decline than the 8.4% fall in its value counterpart .IVX which houses economy-sensitive sectors like banks, energy, and industrials.

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

At 8:38 a.m. ET, Dow e-minis 1YMcv1 were down 159 points, or 0.5%, S&P 500 e-minis EScv1 were down 31.75 points, or 0.81%, and Nasdaq 100 e-minis NQcv1 were down 183.75 points, or 1.54%.

Among other stocks, Walt Disney Co DIS.N slid 5.5% after its second-quarter revenue and profit fell short of estimates and the entertainment giant cautioned that supply chain disruptions and rising wages could pressure finances. nL3N2X33M2

Plant-based protein maker Beyond Meat Inc BYND.O slumped 24.1% and was on track to open below its IPO price as quarterly losses ballooned. nL3N2X33M7

Tapestry TPR.N climbed 6.7% after the Kate Spade owner reported upbeat third-quarter results, driven by higher prices and strength in its North American market. nL3N2X42R4

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

((Devik.Jain@thomsonreuters.com))