New sell-off on Wall – A breath from bear market and Dow losing 30,000 points

A new sell-off brought strong losses for the US market indicators, which lost yesterday and its gains yesterday, as the initial satisfaction from the strong position of the Fed was followed today by heightened worries about the upcoming economic recession.

In particular, the Dow Jones industrial average completed trading with a dip of 740 points or 2.42% losing the psychological limit of 30,000 units (closing on 29,927) and even worse it is now 19% below its intra-conference high on January 5, ie about 1% from the entrance and typically in a bear market area.

Similarly, the broader S&P 500 market index sank deeper into the bear market where it entered on Monday, moving today with strong losses 3.1% at 3,671 unitswhile the technologically weighted Nasdaq collapsed with -4% at 10,646 units.

The market yesterday showed enthusiasm to hear the largest increase in interest rates by the Fed since 1994, at a beastly size of 0.75% while at the same time the pressure on bonds eased.

However, the euphoric climate did not last long as the Fed followed in the footsteps of other countries’ central banks, reiterating concerns about whether a simultaneous global drain on liquidity would allow the Fed to catch up with inflation. without causing a recession in the world’s largest economy.

In particular, the central bank of Switzerland announced today the first increase in interest rates after 15 years, by 50 basis points in fact, while in England the BoE increased its own by another 25 basis points.

In this climate, technology companies have been hit hard, as development securities such as industry are traditionally considered to be hit hardest by rising borrowing costs.

It is characteristic that despite the relief rally yesterday, the sellers had returned to the technological titles already from the pre-conference transactions.

“There is an amazing level of sales in technology right now,” Jim Kramer of CNBC tweeted in the early hours of the morning. “It takes your breath away to watch the sellers quickly get rid of their best tech stocks at 5 p.m.”

In this climate, the Apple ended with a fall 4%the Microsoft he lost 2.7%the Amazon moved to -3.7%Facebook’s parent h Meta in the –5%the Netflix in the -3.8%Google’s parent h Alphabet in the -3.4%while Tesla took a dip 8.5%.

At the same time, in the high capitalization of Dow Jones only four securities were saved, Walmart, Procter & Gamble, Merck and Johnson & Johnson, with small gains of up to 1%.

In contrast, Chevron, Salesforce, Nike, Caterpillar and American Express all finished with a dip of more than 5%.

“The Fed has a needle through a very thin hole and I think investors and the market in general are losing a lot of confidence that they can do it,” Ryan Detrick, chief analyst at LPL Financial, told CNBC. .

“The truth is that the Fed is probably lagging behind in the score. They should have made more aggressive increases – probably starting at the end of last year as we see now – and the market is realizing that,” he added.

At the same time, data released today showed a dramatic further slowdown in economic activity.

New home launches fell 14% in May, with analysts expecting a fall of just 2.6%, while the Fed Philadelphia manufacturing index for June was down -3.3 from 2.6, showing the first contraction ( any measurement below 0) from May 2020 at a time when the market was expecting an increase to 4.8.

It is characteristic that the volatility index VIXthe so-called Wall Street fear index, jumped on it today 12% at 33.2 unitshaving exceeded the levels that were in the first days of the Russian invasion of Ukraine.

In this climate, investors turned en masse to the bond market, with the US 2-year and 10-year bonds seeing their yields fall by 11.7 and 8.6 basis points, respectively.

It is also worth noting that the yield of the 2-year title is at 3.275% and 30 years in 3.359%approaching the so-called reverse of the curve that usually foretells an impending recession.

“It’s time to get out of this artificial world of huge liquidity injections where we all get used to zero interest rates and do stupid things, either investing in market parts we should not invest in, or investing in the economy in ways that make no sense.” , Allianz’s chief investment consultant Mohamed El Erian told CNBC yesterday.

“We are coming out of this regime and the road will have potholes.”

Finally, in some positive news from the day, the labor market seemed to maintain its momentum, albeit at a slightly slower pace, as new unemployment benefit applications fell less than expected, to 229,000 compared to estimates for 215,000.