Topline
The stock market extended an early week selloff on Tuesday as fears of an impending recession intensified with big bank CEOs warning of tougher economic times ahead and companies continuing to announce job cuts—pushing major indexes closer to their yearly lows.
Within hours of Goldman Sachs and JPMorgan’s top executives issuing bearish calls on the economy, … [+]
Key Facts
After falling nearly 500 points on Monday, the Dow Jones Industrial Average shed another 350 points, or 1%, on Tuesday—further erasing losses after a seven-month high reached in late November; the S&P 500 and tech-heavy Nasdaq similarly fell, down 1.4% and 2%, respectively.
Stock losses got worse throughout the day, as sentiment waned after JPMorgan CEO Jamie Dimon on CNBC warned consumer spending will likely weaken next year and a similarly bearish call from Goldman Sachs CEO David Solomon, who told Bloomberg the gloomy economic outlook likely meant there are “some bumpy times ahead.”
Solomon alluded to potential job cuts at Goldman, saying economic uncertainty requires that firms “be a little more cautious” with financial resources, including a company’s “sizing and footprint.”
Another big bank took it a step further: Less than a week after CEO James Gordon warned “some people are going to be let go,” Morgan Stanley reportedly cut about 1,600 of its more than 81,000 employees.
Though employment reports have continued to show strength in the labor market, layoff announcements are “becoming more noticeable,” Oanda analyst Ed Moya wrote in a Tuesday email, blaming the announcement from Morgan Stanley and another from Buzzfeed for fueling the Tuesday selloff.
Crucial Quote
“The outlook is clearly darkening and that has many traders scaling down their risky bets,” says Moya.
Key Background
The stock market has struggled over the past week as investors debate whether the bear market rally that pulled major indexes up as much as 20% from October lows has finally come to an end. In a Monday note to clients, Morgan Stanley analyst Michael Wilson warned rising interest rates still pose a risk to corporate earnings in the coming quarters—especially for technology and consumer-oriented businesses that are historically most vulnerable to weaker consumer demand. He expects the S&P will hit another yearly low before the bear market officially ends, implying the index could still tumble another 9%—at least. The index is already down 18% this year.
Further Reading
2022 Major Layoffs Grow: Morgan Stanley And BuzzFeed Reportedly Cut Jobs (Forbes)
Dow Falls 500 Points As Experts Debate Whether Stock Market Will Crash Again Soon (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2022/12/06/stock-market-selloff-intensifies-dow-falls-350-points-after-big-bank-ceo-warns-of-bumpy-times-ahead/