O'Neil Global Advisors Senior Portfolio Manager Randy Watts says investors are concerned about a possible slowdown in earnings growth.
"Earnings estimates for this year and next year have started to move lower, and I think that's being driven by two factors. The first is inflation. You're seeing rising energy costs and rising labor costs. Remember last month labor costs are about 4.6% on a year to year basis in second supply chain disruptions, which are making it difficult for companies to bring all of the product they want to market."
With supply chain disruptions and inflation pressures slamming businesses, the International Monetary Fund cut its outlooks for global growth as well as for the United States and other major industrial powers.
The Dow fell a third of a percent. The S&P 500 lost a quarter of a percent. And the Nasdaq declined a tenth of a percent.
MGM Resorts was the S&P's top gainer. Credit Suisse more than doubled its price target and hiked its rating to "outperform" from "neutral." It expects MGM's debt to shrink and cash to rise as a result of some recent deals.
Shares of Tesla took off as the electric vehicle maker hit a new milestone in China. It sold a record 56,000 vehicles that it produced there.
Also rising: shares of American Airlines. The carrier projected a quarterly loss that was smaller than analysts expected, betting that an increase in holiday flight demand and a lifting of travel bans will boost bookings for the rest of the year.
