Wall Street falls on rate hike worries

© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 11, 2022. REUTERS/Brendan McDermid

By Devik Jain and Amruta Khandekar

(Reuters) -Wall Street's main indexes fell in choppy trading on Thursday, weighed down by concerns that aggressive interest rate increases to curb decades-high inflation could tip the economy into recession.

Nine of the 11 major S&P sectors were lower, with utilities leading losses with a 1.7% decline, followed by financial, energy and technology shares.

Consumer discretionary bucked the trend to rise 0.9% as Kate Spade owner Tapestry (NYSE:TPR) soared 15.1% on expectations of a demand recovery in its key market of China.

Growth stocks Alphabet (NASDAQ:GOOGL) Inc, Tesla (NASDAQ:TSLA) Inc, Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) Corp fell between 1.1% and 3% and weighed the most on the S&P 500 and the Nasdaq.

"You have the Fed (Federal Reserve) taking liquidity out of the market and that leads to lower valuations for equities. If the Fed starts to maybe change its tone a little bit - we could see a bounce in an equity market," said Carin Pai, head of portfolio management at Fiduciary Trust International.

"I do think we're getting to the point where there are some good buying opportunities. The markets still appear to be looking for some stabilization, it's hard to know exactly where the bottom is."

Data this week showed U.S. consumer and producer prices moderated in April but were likely to stay hot for a while and keep the Federal Reserve's foot on the brakes to cool demand.

Traders are pricing in a 61% chance of a 75 basis point hike by the Fed in June. [IRPR]

Investors are worried that surging inflation coupled with the Fed's policy moves, the war in Ukraine and latest COVID-19 lockdowns in China could spark a global economic slowdown.

The Nasdaq entered bear market territory earlier this year and has now declined more than 29% from its record close in November, while the S&P 500 index has been in sight of the milestone with an over 18% retreat from its all-time closing high on Jan. 3.

If the benchmark index ends more than 20% below its record close, it would confirm a bear market for the first time since the pandemic-driven selloff in March 2020.

At 12:58 p.m. ET, the Dow Jones Industrial Average was down 228.91 points, or 0.72%, at 31,605.20, the S&P 500 was down 21.05 points, or 0.53%, at 3,914.13, and the Nasdaq Composite was down 13.41 points, or 0.12%, at 11,350.82.

Declining issues outnumbered advancers for a 1.18-to-1 ratio on the NYSE, while advancing issues outnumbered decliners by a 1.24-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 72 new lows, while the Nasdaq recorded 6 new highs and 1,288 new lows.