Wall Street’s main stock indexes experienced their worst day since 2020 on Thursday, erasing all gains in Wednesday’s “relief rally” and deepening overall market losses since the beginning of the year.
On the dashboard, the industrial Dow Jones recorded a fall of 1,063.09 points or 3.12%, to 32,997.97 points, with S&P 500 to lose 147.79 points or 3.44%, at 4,152.38, while the technological Nasdaq crashed with losses of 647.16 points or 4.99%, to 12,317.69 points.
“Gaining 3% and then recording a drop of half a percentage point the next day, is normal … But to have a day like yesterday and then see a 100% reversal in half a day is really rare noted Randy Frederick, general manager of trading and derivatives at the Schwab Center for Financial Research.
Shares of tech giants came under intense pressure, with Facebook parent company Meta Platforms and Amazon losing 6.8% and 7.6% respectively. Microsoft’s share fell 4.4%, while Salesforce’s fell 7.1%. Apple saw its share fall 5.6%.
Shares in the e-commerce sector were a significant source of the “slump” of the indices, as it recorded a series of disappointing quarterly corporate results.
Shares of Etsy and eBay fell 16.8% and 11.7% respectively, following the announcement of weaker-than-expected guidance for 2022 revenue. Shopify fell almost 15% as it moved below the bar. estimates both in terms of profits and quarterly revenue.
For the technological index, it is a “black day”, analogous only to the first period of the outbreak of the coronavirus pandemic.
The yield on the 10-year US government bond, on Thursday, jumped again above 3%, to its highest levels since the end of 2018, reducing the investment mood for “growth stocks”, mainly in the technology sector, which promise profits, but in the long run.
In addition to raising its key interest rate by 50 basis points, the US Federal Reserve announced on Wednesday that it will start reducing its balance sheet as early as June.
Despite clarifying Fed Jerome Powell’s progress on raising interest rates, specifically that there is no over-the-counter surplus of 75 basis points on the table, the US Federal Reserve remains open to pushing interest rates above the “neutral level” “(estimated at 2.5% and considered to be the crossroads between easing and tightening monetary policy),” said Zachary Hill, head of portfolio strategy at Horizon Investments.
“Despite the tightening of financial conditions we have seen in recent months, it is clear that the Fed wants to go further,” he said. “Higher stock prices are not compatible with such a desire, unless supply chains recover quickly or workers return to the labor market with momentum.”
Shares “tied” to the growth prospects of the US economy, such as those of Caterpillar, JPMorgan Chase and Home Depot, also recorded strong losses.
Carlyle Group co-founder David Rubenstein stressed that investors need to “get back to reality” in the face of winds blowing on both the markets and the US economy, including because of the war in Ukraine and of high inflation.
The sell-off was broad-based, with more than 80% of S&P 500 shares falling. Even companies that performed better than average at the beginning of the year, such as Chevron, Coca-Cola and Duke Energy, suffered even small losses.
All 30 Dow shares traded negative. The losses were led by those of Salesforce, Nike, Apple.
Unemployment benefit applications in the US increased
The number of Americans applying for unemployment benefit for the first time rose more than expected last week, although it remained at levels compatible with a healthy job market.
In particular, the initial unemployment benefit applications increased by 19,000 to the seasonally adjusted size of 200,000 for the week ended April 30, according to the US Department of Labor. Analysts’ average estimates in a Reuters poll put the applications at 182,000 for the past week.
Applications have been hovering below the 200,000 level since mid-February amid strong labor market demand. Government figures released this week show that job openings hit a new record of 11.5 million at the end of March.
Applications had skyrocketed to a record 6.137 million in early April 2020 when a pandemic forced the federal government to impose massive lockdowns across the country.
The figures come shortly before the Labor Ministry’s report on employment last month. Government figures to be released tomorrow are expected to show that jobs in the country rose by 391,000 in April after rising by 431,000 in March, according to a Reuters poll of analysts.
Source: Capital
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