Slumping technology stocks pull Wall Street lower

FILE - Traders work on the floor at the New York Stock Exchange in New York, May 19, 2022. Stocks are opening lower on Wall Street Tuesday, May 24, 2022 led by drops in tech heavyweights like the parent companies of Facebook and Google. The S&P 500 index fell 1.2% in the early going, and the tech-heavy Nasdaq was down almost twice as much, 2.3%. (AP Photo/Seth Wenig) (ASSOCIATED PRESS)
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NEW YORK (AP) — Stocks fell in morning trading on Wall Street Tuesday, weighed down by a big decline in tech heavyweights over concerns about persistently rising inflation's impact to their bottom lines.

The S&P 500 index fell 2.1% as of 10:14 a.m. Eastern. The Dow Jones Industrial Average fell 351 points, or 1.1%, to 31,524 and the Nasdaq fell 3.6%.

A stark profit warning from Snapchat’s parent company spooked investors into dumping the stocks of major social media companies. Snap plummeted 39%, while Facebook's parent, Meta, slumped 10%. Google's parent fell 8%.

Technology and communications stocks, with their lofty values, tend to have an outsize influence on the market. The sectors have been responsible for much of the volatility the market has seen recenlty as well as a the broad decline the market's major indexes have seen since early April as investors worry about the impact of rising inflation on businesses and consumers.

Retailers and companies that rely on direct consumer spending also fell sharply. Amazon shed 4.3% and Target fell 3.9%.

Bond yields fell. The yield on the 10-year Treasury fell to 2.75% from 2.86% late Monday.

Falling bond yields weighed on banks, which rely on higher yields to charge more lucrative interest on loans. Citigroup fell 1.9%.

Household goods companies and utilities, which are considered less risky than other sectors, made gains.

The pile of concerns weighing on the market has pushed the benchmark S&P 500 to the brink of a bear market, which is when an index falls 20% from its most recent record high. It is down roughly 19% from its record high set earlier this year.

Inflation has been weighing on a wide range of industries in the form of higher raw materials costs and more costly labor. Many businesses have been raising prices on everything from food to clothing to offset the impact of higher costs, but the pressure has been increasing. Key retailers, including Target and Walmart have said that higher costs are squeezing operations. They also raised concerns that consumers are tempering spending on a wide range of goods.

Consumers were already getting squeezed by a supply and demand disconnect when Russia invaded Ukraine and prompted another jump in energy prices, including gasoline. The pain at the pump has cut into spending for many. Supply chain problems were worsened by China's recent lockdown in several major cities as it deals with rising COVID-19 cases.

Wall Street is also worried about the Federal Reserve's plan to fight inflation. The central bank is raising interest rates aggressively from historic lows, but investors are concerned that it could go too far in raising rates or move too quickly. That could slow down businesses and potentially bring on a recession. On Wednesday, investors will get a more detailed glimpse into the Fed’s decision-making process with the release of minutes from the latest policy meeting.