By Yasin Ebrahim
Investing.com -- The S&P 500 cut some losses Tuesday, but remained under pressure as fresh warning signs of a possible recession spooked investors and triggered an energy-led rout on Wall Street.
The S&P 500 fell 0.8%, the Dow Jones Industrial Average slipped 1.4%, or 425 points, and the Nasdaq was up 0.60%
The yield on the 2-year Treasury bond jumped above the yield on the 10-year Treasury note, marking a key inversion in the yield curve that usually signals trouble on the horizon for the economy.
Recession fears have been gaining momentum following the Atlanta Fed’s GDP forecast, calling for a 2% decline in the second quarter. Following the 1.6% decline reported first quarter GDP, another decline would place the economy in a technical recession.
“As investors return from the 4th of July holiday, sentiment remains uneven as market participants continue to ping pong between fears of recession and concerns over too high inflation,” Stifel said in a note.
Energy stocks were the hardest hit as oil prices slipped more than 9% on bets that recession would weigh on energy demand.
Halliburton (NYSE:HAL), APA (NASDAQ:APA), Hess Corporation (NYSE:HES) were among the top decliners falling more than 8%, while Occidental Petroleum (NYSE:OXY) fell more than 5% even as Warren Buffet’s Berkshire Hathaway (NYSE:BRKa) increased its stake in the latter to 17.3%.
The slump in Treasury yields hurt bank stocks, with just over a week ago until major Wall Street banks kick off the quarterly earnings season. JPMorgan (NYSE:JPM) is set to report results on July 14.
As the fears of recession mounted, growth corners of the market were the outperforming sectors on expectations that the Fed may not deliver aggressive interest rate hikes to bring inflation under control.
Investors piled into beaten down retailers, and cruise and casino companies to push consumer stocks up more than 1%.
Norwegian Cruise (NYSE:NCLH), Dollar Tree (NASDAQ:DLTR), Caesars Entertainment (NASDAQ:CZR) were outperforming, with the latter up more than 8%.
Big tech was also in the ascendency as investors, led by Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) despite Barclays warning of a “perfect storm” in digital advertising amid rising competition and slowing digital-ad spending.
Chip stocks also cut some intraday losses even as investors continued to mull over Micron Technology's (NASDAQ:MU) recent quarterly results that flagged headwinds for chip demand.
In other news, Ford Motor (NYSE:F) fell 2% after reporting that sales rose 1.8% to 483,688 new vehicles in the second quarter from a year earlier, below estimates for a gain between 3.3% and 5.1%.