Stocks fell sharply on Thursday after new data showed retail sales fell more than expected in November, raising fears that the Federal Reserve’s relentless interest rate hikes could tip the economy into a recession .

The Dow Jones Industrial Average fell 886 points, or 2.6%, heading for its worst day since September as hopes of a year-end rally dimmed. The S&P 500 fell 2.77%, bringing its December decline to nearly 5%. The Nasdaq Composite fell 3.43% as the heavily tech-beaten index extended its 2022 losses to more than 31%.

The selloff was widespread with just 14 S&P 500 stocks trading in positive territory. Mega-cap tech stocks declined, with shares of Apple and Alphabet down more than 4%, and the shares of Microsoft and Amazon down more than 3%. Shares of Netflix fell more than 9% following a report from Digiday that the streaming company is offering to refund money to advertisers after missing audience targets.

Biggest Dow Jones declines of the year

Date Points %
09/13/2022 -1,276 -3.94
05/18/2022 -1,165 -3.57
05/05/2022 -1,063 -3.12
08/26/2022 -1,008 -3.03
04/22/2022 -981 -2.82
06/13/2022 -876 -2.79
04/29/2022 -939 -2.77
06/10/2022 -880 -2.73
12/15/2022 -907 -2.67
06/16/2022 -741 -2.42

The disappointing retail sales report suggests inflation is weighing on consumers. Retail sales fell 0.6% in November, according to the Commerce Department. That was a bigger loss than the Dow Jones estimate of a 0.3% drop.

The selloff began on Wednesday following the Fed’s latest increase in its overnight borrowing rate. The central bank also said it would continue raising rates through 2023 and expected its federal funds rate to peak at 5.1%, higher than expected. With Wednesday’s half-percentage-point hike, the target rate range is currently 4.25% to 4.5%, the highest in 15 years.

“The stock market reaction now factors in a recession and dismisses the possibility of a ‘soft/soft’ landing mentioned recently by Powell at the [Brookings Institution]“wrote Quincy Krosby, chief global strategist at LPL Financial, on Thursday.

“The tug of war between the Fed and the markets is squarely on the side of the market: the downturn is not ‘transient’ and the Fed will be forced to act before 2024,” Krosby added.

The Dow Jones closed below 34,000 on Wednesday, then selling intensified on Thursday on poor retail sales data. Treasury yields continued to defy the Fed and fall on fears the central bank might go too far. The 10-year yield fell below 3.5%.

Bank stocks also fell as fears of a recession grew. JPMorgan Chase and Bank of America each lost more than 2%.

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