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The S&P 500 fell 0.7%, the Dow Jones Industrial Average fell 0.5%, 183 points, Nasdaq slumped 1.2%.
U.S. services activity rose more than expected in August to 54.5 from 52.7, while the prices paid index component of the survey, a gauge of inflation, increased to 58.9 from 56.8, as strong demand for labor continued to underpinned wage growth.
“We still believe that much of the pressure that fuels inflation is rooted in sticky-high unit labor costs in the service sector,” Jefferies said in a note.
Fresh signs of the inflationary pressures, pushed the odds of a November hike to nearly 50% from 38% a day earlier, according to Investing.com’s Fed Rate Monitor Tool.
Apple fell more than 3%, leading the selloff in tech as reports that China, a key market for the company, ordered employees at government agencies not to use foreign devices including Apple’s iPhones.
The move by China – which has been ramping up efforts to curb the dependence on foreign technology amid national security concerns, comes just a week ahead of the arrival of Apple’s new iPhone set to be unveiled on Sept. 12.
Roku Inc (NASDAQ:ROKU) upgraded its third-quarter guidance after detailing further cost cutting plans including cutting about 10% of its workforce and consolidating office space. its stock was up 1%.
The streaming media device company raised its third-quarter revenue guidance by as much as 7% to a range of $835 million to $875 million, from $815 million previously.
Payments company Block Inc (NYSE:SQ) fell more than 1% after UBS cut its rating on the stock to neutral from buy on concerns about a potential slowdown in margins.
Block gross profit growth will likely take a hit from a weaker consumer backdrop, while a slowdown in Cash App monthly active is expected to pressure monetization rates, {{0|UBS said as it also cut its price target on the stock to $65 from $102.
Southwest Airlines Company (NYSE:LUV) airline cut its third-quarter outlook after warning that August books were on the lower-end of its expectations at a time when higher fuel prices are expected to weigh on performance.
Southwest said it now expects Q3 revenue per available seat mile to decline between 5% and 7% from a prior estimate for a decline of 3% to 7%.
With U.S. crude prices up more than 35% since mid-year, pushing jet-fuel prices higher, other airlines including United Airlines (NASDAQ:UAL) and Alaska Air (NYSE:ALK) also signaled that higher fuel prices would dent growth.
Bank of America said rising commodity prices have created “meaningful” earnings volatility for airlines this year and dampen their ability to hike prices.
Zscaler (NASDAQ:ZS) fell 3% despite reporting quarterly guidance and fiscal fourth-quarter results that topped Wall Street estimates, underpinned by ongoing cyber security demand.
