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The S&P 500 falls below 4,600

  • US stocks fell broadly on Tuesday as Fed tightening fears weighed on technology and weak Goldman Sachs earnings weighed on financials.
  • The S&P 500 fell 1.8%, the Nasdaq 100 fell more than 2.5%, and the Dow Jones dropped 1.5%.
  • The S&P 500 fell back below 4600 to hit new yearly lows.

US stock markets experienced broad selling pressure on Tuesday, with the S&P 500 tumbling 1.8% to drop back below 4,600 to hit new yearly lows, the Dow falling 1.5% to drop below 35,500, and the Nasdaq 100 shedding more than 2.5%. Market commentators generally referred to “Fed tightening fears” as the main driver of the decline. Michael O’Rourke, Chief Market Strategist at JonesTrading, commented that “we are reviewing prices as the market prepares for interest rate increases and we still have a bit of a way to go to prepare for three rate hikes. or four rate increases.”

Despite a sharp rise in US government bond yields that hit tech/growth names hard (hence the Nasdaq 100 underperform), financial stocks were unable to benefit, and the S&P 500 GICS financial sector lost more than 2.0% due to negative earnings from Goldman Sachs. Shares of the bank lost more than 7.0% and hit their weakest levels since last May after earnings missed earnings expectations amid weak trading activity. The only sector to rise was energy, with the S&P 500 GICS sector rising 0.2% amid oil prices surging to multi-year highs (with WTI near $86.00 per barrel).

In terms of the other major GICS sectors, the tech-heavy information technology and communication services sectors lost 2.4% and 1.9%, respectively, while the consumer discretionary sector lost 2.0%. Consumer Staples, Industrial Products, Health Care, Materials and Utilities lost between 1.1% and 1.6%. The broad selling pressure in Tuesday’s market a change in conditions compared to recent sessions that had been characterized more by rotation from “value” names (incoming generation, low multiple) to “growth” names (incoming generation low, multiple high). As expectations of Fed rate hikes have risen in the sessions, investors have dumped growth stocks in favor of value stocks.

The S&P 500 Value Index is down just 0.4% in the past five sessions versus a 2.7% loss in the S&P 500 Growth Index. Recent investment bank surveys hint at deteriorating sentiment towards tech/growth names. Tuesday’s BoA fund manager survey showed that managers had aggressively reduced their overweight positions in technology to the lowest levels since 2008. Meanwhile, a survey by Deutsche Bank found that most respondents view the technology sector American like a bubble.

Technical levels

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