A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 7, 2022.
A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 7, 2022. Reuters / ANDREW KELLY

The S&P 500 and the Dow fell for the second straight day on Thursday as Cisco Systems slumped following a dismal outlook, while a rebound in megacap growth stocks boosted the battered Nasdaq.

Shares of the networking gear maker slumped 14.4% as it lowered 2022 revenue growth outlook, taking a hit from Russia exit as well as component shortage due to China lockdowns.

Six of the 11 major S&P sectors advanced, with consumer discretionary sector up 1.1%.

Microsoft Corp, Amazon.com and Tesla Inc gained between 1% and 1.7%. They are down between 7.3% and 16.3% this month.

"Growth stocks have been beaten down quite a bit and to the extent that there may be signs of bear market rally, growth stocks will tend do better during those short sprints," said Eric Schiffer, chief executive officer of private equity firm The Patriarch Organization.

The S&P consumer staples index fell 1.7% to hit a more than five-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 U.S. consumers.

Kohl's Corp became the latest retailer to flag a hit from four-decades high inflation as the department store chain cut its full-year profit forecast.

Its shares, however, gained 4.8% after falling 11% in the previous session, triggered by dismal results from Target Corp.

The S&P 500 is down 18.2% from its record close on Jan. 3, as investors adjust to a rise in prices, geopolitical uncertainty stemming from the war in Ukraine and tightening financial conditions with the U.S. Federal Reserve raising rates.

A close below 20% for the benchmark index will confirm bear market territory, joining its tech-heavy peer Nasdaq.

"The market is absorbing the potential of a recession and will continue to deal with this challenge of determining what is proper valuation at a time when earnings are likely to be lower, and the Fed is likely to continue to hold the line," Schiffer said.

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 expects a mild U.S. recession at the end of 2022 and early 2023.

At 12:23 p.m. ET, the Dow Jones Industrial Average was down 0.63% to 31,291.09 and the S&P 500 edged 0.07% lower to 3,921.07 in choppy trading after closing down 4% on Wednesday. The Nasdaq Composite climbed 0.75% to 11,504.25.

The CBOE volatility index, also known as Wall Street's fear gauge, fell to 30.09 points, after hitting its highest level since May 12 earlier in the session.

Canada Goose Holdings Inc jumped 11.5% after it forecast upbeat annual earnings, encouraged by strong demand for its luxury parkas and jackets.

Advancing issues outnumbered decliners by a 1.35-to-1 ratio on the NYSE and by a 1.68-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 43 new lows, while the Nasdaq recorded eight new highs and 293 new lows.