Stock losses mount as investors eye earnings, inflation

In this photo provided by the New York Stock Exchange, trader David O'Day, center, works on the floor, Thursday, Jan. 20, 2022. Stocks rose broadly in morning trading on Wall Street Thursday as investors reviewed the latest corporate earnings and gauged the economic impact of rising inflation. (Courtney Crow/New York Stock Exchange via AP)

In this photo provided by the New York Stock Exchange, traders work on the floor, Thursday, Jan. 20, 2022. Stocks rose broadly in morning trading on Wall Street Thursday as investors reviewed the latest corporate earnings and gauged the economic impact of rising inflation. (Courtney Crow/New York Stock Exchange via AP)

In this photo provided by the New York Stock Exchange, trader Ben Tuchman works on the floor, Thursday, Jan. 20, 2022. Stocks rose broadly in morning trading on Wall Street Thursday as investors reviewed the latest corporate earnings and gauged the economic impact of rising inflation. (Courtney Crow/New York Stock Exchange via AP)

In this photo provided by the New York Stock Exchange, Robert Greason works on the trading floor, Thursday, Jan. 20, 2022. Stocks rose broadly in morning trading on Wall Street Thursday as investors reviewed the latest corporate earnings and gauged the economic impact of rising inflation. (Courtney Crow/New York Stock Exchange via AP)

A late-afternoon sell-off wiped out gains for stocks on Wall Street Thursday and sent major indexes deeper into losing territory for the year.

The sharp about-face for the broader market was once again directed by technology stocks, which have been behind choppy trading throughout the week. As investors prepare for higher interest rates, shares in pricey tech companies and other expensive growth stocks look relatively less attractive.

The S&P 500 fell 50.03 points, or 1.1%, to 4,482.73, with nearly 85% of stocks in the index falling. The benchmark index closed at a three-month low after having been up as much as 1.5% earlier in the day. It’s now down 6% for the year.

The Nasdaq fell 186.23 points, or 1.3%, to 14,154.02, after rising as much as 2.1%. The index’s losses in recent months had by Wednesday left it in what Wall Street considers a market correction, or 10% below its peak. Apple fell 1% and chipmaker Nvidia shed 3.7%.

The Dow Jones Industrial Average fell 313.26 points, or 0.9% to 34,715.39.

Investors appeared to be bargain-hunting in early trading, but then reversed course and shifted money back toward safe-play investments. The less risky utilities sector was the only S&P 500 sector to close higher. Retailers and communications companies started out with gains but fell back in the afternoon. Meta Platforms dropped 1% and Lowe’s lost 4.6%.

Stocks are headed for weekly losses in what has so far been a losing month for every major index.

“The backdrop of higher rates and slowing growth is a serious concern, but so are the number of stocks, especially in the Nasdaq, making new 52-week lows,” said Sean Bandazian, senior investment analyst at Cornerstone Wealth. “There are a lot of broken trends out there that could make finding a bottom in the near term a problem.”

More than 500 stocks in the Nasdaq composite index hit 52-week lows Thursday, including Starbucks and T-Mobile.

The downturn follows a strong 2021 where the S&P 500 gained 26.9%. Investors may be resetting their expectations moving forward, said Mark Hackett, chief of investment research at Nationwide.

“Investors are starting to get more realistic about the way the world is going to look going forward,” he said.

The Labor Department gave Wall Street a disappointing update on the labor market with its weekly unemployment report. The number of Americans applying for unemployment benefits rose to the highest level in three months as the fast-spreading omicron variant continued to disrupt the job market.

The job market has had a rocky recovery from the virus pandemic. The unemployment rate fell last month to a pandemic low 3.9%.

Employment data was also closely watched by investors trying to gauge how it might affect the Federal Reserve’s decision to reverse its support for the economy by raising interest rates. The central bank made it clear early in the pandemic that it was basing much of its support on how quickly employment recovers.

The Fed is now expected to raise rates earlier and more often than it had previously signaled in order to fight rising inflation that threatens to derail a further economic recovery. Supply chain problems and higher raw materials costs have prompted businesses to raise prices on finished goods and economists are concerned that consumers will eventually refuse to pay higher prices and cut their spending.

Companies are reminding investors that supply chain problems are still weighing on operations. Recent inflation reports have been worrisome, while data on retail sales has also disappointed.

“These are all the things that are justifying some of the sloppiness we’re starting the year with,” Hackett said.

The latest round of corporate earnings is also giving investors a clearer picture of where Americans are spending money and how inflation is impacting the economy.

American Airlines fell 3.2% and United Airlines slipped 3.4% after warning investors that the latest surge in COVID-19 cases will hurt their finances early in 2022. Both airlines reported losses for the fourth quarter, though they were smaller than analysts’ expected.

Aluminum products maker Alcoa jumped 2.7% after reporting strong fourth-quarter financial results as prices for commodities rose. Insurer Travelers rose 3.2% after handily beating analysts’ financial forecasts.

Peloton shares lost about a quarter of their value after CNBC reported the company is temporarily halting production of its treadmills and exercise bikes. The business news network said it reviewed internal Peloton documents that indicated demand for the company’s connected fitness equipment had fallen sharply because of pricing and competition.

Peloton shares soared early in the pandemic as people exercised at home, but have fallen 85% since closing at an all-time high of $167.42 on Jan. 13, 2021. On Thursday, the shares lost 23.9% to $24.22.

Bond yields rose. The yield on the 10-year Treasury inched up to 1.83% from 1.82%.