Stocks suffer biggest drop in almost two years

Stocks posted their biggest daily drop in almost two years as investors assessed the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.

The sell-off sent the S&P 500 down 4%, the most since June 2020, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft.

The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. also slid more than 5%. 

Cisco Systems Inc., the biggest maker of computer networking equipment, said it expects revenue to decline in the current quarter as a result of disruptions stemming from Chinese lockdowns and the Ukraine war. The stock dropped as much as 19% in post-market trading, the steepest in its history, according to data compiled by Bloomberg.

Treasuries rose across the board, sending the 10- and 30-year Treasury yields down more than 10 basis points. The dollar rose against all of its Group-of-10 counterparts except the yen and Swiss franc.

The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns. 

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat.

If the Fed raises its key rate somewhat above what it thinks is a “neutral” level for the economy and stops there, that should help bring inflation down from current elevated levels, Chicago Fed President Charles Evan said.

[More: Market sentiment extremely bearish, say T. Rowe, BlackRock managers]