* Snap Inc set for worst day on record after profit warning
* Abercrombie & Fitch slumps after lowering revenue outlook
* Indexes down: Dow 0.50%, S&P 1.43%, Nasdaq 2.73% (New throughout, adds NEW YORK dateline, changes byline)
By Stephen Culp
NEW YORK, May 24 (Reuters) - Wall Street veered lower on Tuesday as fears over whether attempts to curb decades-high inflation growth could tip the U.S. economy into recession dampened investor risk appetite.
All three major U.S. stock indexes retreated from Monday's rally, with the S&P 500 hovering within percentage points of confirming it has been in a bear market since reaching its all-time high on Jan. 3.
"You have this environment where investors and traders are suspect of any bounce in the market," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "Investors are concerned that we haven't reached the bottom, and days like yesterday are simply bear market rallies."
Much of the sell-off was driven by a profit warning from Snap Inc, which sent the company's shares plummeting 41.8%, sparking contagion throughout the social media segment.
Meta Platforms Inc, Alphabet Inc, Twitter Inc and Pinterest Inc were down between 4% and 22%, and the broader S&P 500 Communications Services sector slid 4.2%.
Global supply chain disruptions have been exacerbated by Russia's war with Ukraine and restrictive measures in China to control its latest COVID-19 outbreak, sending inflation to multi-decade highs.
The U.S. Federal Reserve has vowed to aggressively tackle persistent price growth by hiking the cost of borrowing, and minutes from its most recent monetary policy meeting, expected on Wednesday, will be parsed by market participants for clues regarding the speed and extent of those actions.
Investors currently expect a series of 50-basis-point rate hikes over the next several months, fueling fears that the central bank could push the economy into recession, a scenario that is increasingly being baked into analyst projections.
"With all this uncertainty, how aggressive is the Fed going to be?" Pavlik said. "We’re in a no-man’s-land until we get a more complete picture."
"We might be closer to recession than we were led to believe," Pavlik said. "We might be in recession now."
Data released on Tuesday painted a picture of waning economic momentum, with new home sales plunging and business activity decelerating.
Fed Chair Jerome Powell's counterpart in Frankfurt, European Central Bank President Christine Lagarde, said she expects the ECB deposit rate to be raised at least 50 basis points by the end of September,
The Dow Jones Industrial Average fell 158.61 points, or 0.5%, to 31,721.63, the S&P 500 lost 56.83 points, or 1.43%, to 3,916.92 and the Nasdaq Composite dropped 314.41 points, or 2.73%, to 11,220.87.
Among the 11 major sectors of the S&P 500, communication services and consumer discretionary were down the most.
Apparel retailer Abercrombie & Fitch Co tumbled 30.9% after posting a surprise quarterly loss and cutting its annual sales and margins outlook.
Work-from-home darling Zoom Video Communications Inc jumped 6.3% after it raised it full-year profit forecast, citing solid enterprise demand.
Declining issues outnumbered advancing ones on the NYSE by a 2.12-to-1 ratio; on Nasdaq, a 2.96-to-1 ratio favored decliners.
The S&P 500 posted two new 52-week highs and 40 new lows; the Nasdaq Composite recorded 12 new highs and 398 new lows. (Reporting by Stephen Culp; additional reporting by Devik Jain and Anisha Sircar in Bengaluru; editing by Jonathan Oatis)