S&P 500, Dow slump as Cisco skids

On Thursday, the S&P 500 and the Dow extended losses as Cisco Systems slumped after it gave a dismal outlook, while investors fretted about the impact of surging inflation on economic growth and corporate earnings.

The networking gear maker's shares fell by 12.7% as it lowered its revenue growth outlook in 2022, taking a hit from Russia exit as well as component shortage due to China lockdowns.

Kohl's Corp. KSS.N fell 1.1% after the department store chain cut its full-year profit forecast, the latest U.S. retailer to flag a hit from four-decades high inflation.

The S&P consumer staples index fell 1.9% to hit a seven month low and was the biggest decliner among the 11 major sectors as retail firms face the brunt of rising prices hurting the purchasing power of US consumers.

Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas, said the consumer component is starting to weaken, which is bolstering the perspective that we are heading into a recession.

Consumer spending accounts for more than two-thirds of US economic activity.

The S&P 500 and the Nasdaq closed down more than 4% in the previous session as growth stocks sank and Target Corp posted weak results. The benchmark index is down 18.6% from its record close on January 3 and a close below 20% will confirm bear market territory, joining its tech-heavy peer Nasdaq IXIC.

The sell off this year has been caused by rate-sensitive growth as investors adjust to tighter financial conditions with the US Federal Reserve raising rates.

The central concern facing investors right now is how the Federal Reserve will not be able to tame inflation without a recession, according to Ryan Belanger, managing principal and founder of Claro Advisors.

The investors should be familiar with the downside and upside moves in stocks, which are common during times of great uncertainty. Goldman Sachs strategists predicted a 35% chance of the U.S. economy entering a recession in the next two years, while Wells Fargo Investment Institute predicts a mild U.S. recession at the end of 2022 and early 2023.

The Labor Department's report showed weekly jobless claims unexpectedly increased last week, while the Philadelphia Fed's business conditions index dropped to a reading of 2.6 in May from 17.6 in April.

The Dow Jones Industrial Average fell 0.89% to 31,211 at the end of the day. 38 and the S&P 500 dropped 0.42% to 3,907. The battered Nasdaq Composite, however, was 0.26% higher, to 11,447. Growth shares such as Alphabet Inc, Microsoft Corp. MSFT.O and Amazon.com were boosted in 30 by megacap tech and growth shares.

The CBOE volatility index, also known as Wall Street's fear gauge, rose to 31.57 points, its highest since May 12.

Canada Goose Holdings Inc jumped 5.3% after it forecast upbeat annual earnings, boosted by strong demand for its luxury parkas and jackets.

Declining issues outnumbered advancers for a 1.23 to 1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.08 to 1 ratio on the Nasdaq.

The S&P index recorded a new 52 week high and 42 new lows, while the Nasdaq recorded four new highs and 257 new lows.