Significant losses on the Wall with Nasdaq weighing on – 11% ‘free fall’ for Twitter

Wall Street returned to a losing streak at the start of the new week, with the technology sector bearing the brunt of the pressure as new pandemic containment measures imposed by China over the weekend brought fears of a global recession back to the fore.

Investors, meanwhile, are gearing up for the start of the second-quarter corporate earnings season as they look to see how the continued surge in inflation has affected business activity as the Federal Reserve looks set to continue tightening monetary policy. policy, further worsening the economic conditions for business.

Fears of a slowdown or even a recession in the global economy were brought back to the fore today by new strict health restrictions imposed by Beijing in several cities after the detection of Omicron’s highly contagious BA.5 substrain in the country.

Given that China accounts for more than a quarter of global production, any potential disruption to business activity is feared to further exacerbate the significant problems facing global supply chains, likely leading to further spikes in commodity and product prices, the at a time when inflation, which is showing no signs of abating from its 40-year highs, is already affecting business in many countries.

Development that reinforces estimates that the Federal Reserve will stick to its aggressive policy to rein in high inflation, risking a “bumpy” landing of the economy, with the chances of a recession increasing more and more by the day.

Against this background, investors await new inflation data due on Wednesday, as well as the first announcements of second-quarter corporate results starting on Thursday, to see how inflationary pressures have affected corporate profitability.

“This is a very important season (not all of them are that important), as the collapse in stocks so far in 2022 has largely been driven by margin compression rather than a real inability to turn a profit,” analysts at Deutsche Bank explained.

Through Friday, S&P 500 companies were expected to post a 5.7% year-over-year rise in earnings for the second quarter of the year, according to IBES data from Refinitiv, the smallest expansion since the fourth quarter of 2020, amid pandemic. However, expectations have been skewed by estimates of 239.1% annual growth in the energy sector. Excluding energy, earnings are expected to shrink 3%, according to the data. For the full year, corporate profitability is expected to rise 9.4%, but just 3.8% excluding energy.

Indicators – statistics

Thus, in the first session of the new week, the indexes ended trading with losses and even near the lows of the day, with technology shares leading the decline.

In particular, the Dow Jones industrial index, although it tried to react intra-sessionally, did not show any strength and finally ended almost 165 points or 0.52% lower, closing at 31,173.84 points, while the wider S&P 500 also recorded significant losses. which after today’s -1.17% is at 3,853.95 units.

The greatest pressure, however, was received by the technological Nasdaq, which after the “jump” of the previous week, returned to a strong downward trajectory, recording on Monday losses of 262.71 points or 2.26%, at 11,372.60 points.

Of the blue chip index stocks, just nine finished the day in the green, with Merck the top gainer at 1.64%, and Visa (0.73%) and Procter & Gamble (0 .70%) to follow, while the remaining 21 recorded losses, with Nike (-2.61%), Walt Disney (-2.32%) and Caterpillar (-2.28%) being the biggest “weights” .

In business, Twitter’s stock plunged more than 11%, ending the day at $32.67, in the wake of Elon Musk’s decision to withdraw his proposal to acquire the social network, with the company points out that it will legally pursue the completion of the transaction.