Markets opened slightly lower Tuesday as a major sell-off prompted by fears of a slowing economy rolled on.
The S&P 500, a broad index of stocks, was down as much as 0.3%. Year to date, the index is down about 5%, and has given up all the gains it had accrued after Donald Trump’s electoral victory in November.
The Dow Jones Industrial Average was off about 150 points, or 0.4%. The tech-heavy Nasdaq was down 0.2%.
The latest warning signs about economic growth came from the airline industry: Three major carriers separately warned they were seeing signs of slowing demand, compounded by ongoing jitters in the wake of the mid-air crash involving an American Airlines plane and a military helicopter over the Potomac earlier this year.
In a filing, American said “the revenue environment has been weaker than initially expected due to the impact of Flight 5342 and softness in the domestic leisure segment, primarily in March.”
That followed a filing from Delta Air Lines that said its revenues were being affected « by the recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in Domestic demand.”
Finally, Southwest Airlines slashed its earnings guidance for the rest of the year.
Investors in general are throttling back their expectations for stocks amid growing uncertainty and as Trump signals he will be less focused on equities than in his first term.
Early Monday, analysts with Citigroup downgraded their rating of U.S. stocks from “overweight” to “neutral,” saying the exceptionalism of U.S. firms’ financial performance looks to be “pausing” amid weaker jobs growth, as well as a short-term momentum loss for artificial intelligence investments. It was the second-major downgrade from a Wall Street firm in as many days, with HSBC making the same call Monday.
And Barclays analysts issued new guidance that the picture for U.S. stocks is rapidly changing.
“The U.S. economy is clearly softening, despite an OK jobs report … US equities have de-rated quickly, but don’t depend on a ‘Trump Put’ yet”
Investors received another piece of worrisome news Monday, when The National Federation of Independent Business reported its monthly small-business optimism survey showed a decline in February, though the index remained above the 51-year average for a fourth-consecutive month.
“Uncertainty is high and rising on Main Street, and for many reasons,” said NFIB Chief Economist Bill Dunkelberg said in a release. “Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall. Inflation remains a major problem, ranked second behind the top problem, labor quality.”
Trump was set to meet with the Washington-based Business Roundtable later Tuesday to converse with American executives, Bloomberg News reported. Investors will be looking to see if the president gives any new guidance on his tariffs or broader economic policy objectives.
Wednesday could prove a further turning point in markets’ trajectories: the Bureau of Labor Statistics will report consumer inflation data for February. Forecasts were a slight softer reading compared with January — meaning price growth would have slowed — but any deviation could ripple through markets.
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