US equities fell sharply on Monday, pushing the S&P 500 below 4,000 for the first time in more than a year, as traders anticipated a fresh load of bad news on inflation and earnings.
The Dow Jones dropped about 654 points, almost 2%. The S&P 500 was down 3.2%, and the Nasdaq Composite lost about 4.3%. At one point, the 10-year Treasury bill hit 3.19%, its highest yield since late 2018.
The moves follow a highly volatile week on Wall Street and mark the fifth straight week of losses for all three major US stock indices.
“The war in Ukraine, a global energy shock and the risk of the Fed trying to fight supply-driven inflation have prompted a reassessment of macro scenarios among market participants,” Blackrock analysts wrote in a note on Monday morning. “We also see little chance of a perfect economic scenario of low inflation and booming growth.”
Fed Chair Jerome Powell told investors Wednesday afternoon that future rate hikes of more than half a percentage point “are not something the [Fed] is actively considering”, leading to a rally in the markets. All the major indices were up about 3%, and the S&P 500 and Dow had their best days in nearly two years.
On Thursday, investors decided they weren’t all that interested in the changes, worried about the increasing chances the Fed could plunge the economy into recession. The Dow is down 1,120 points, or 3.3%, and the S&P 500 is down 3.7%. The Nasdaq Composite is down 5.2%, marking its worst day since 2020.
“I’ve been in the business for 25 years and I’ve never seen anything like it,” said Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, a Wall Street and Federal Reserve research firm. “It’s violent, not just volatile.”
The forward-thinking tech sector is particularly vulnerable to higher rates: Investors expect tech companies to post electric growth, but inflation and higher interest payments will take a big bite out of those profits.
Amazon is down 5.2%, Facebook’s parent company Meta Platforms is down about 3.7% and Google’s owner Alphabet is down 2.8%. Apple and Netflix are down more than 3%.
Data analytics firm Palantir, meanwhile, is down more than 21% after reporting mixed quarterly earnings. Electric vehicle maker Rivian is down nearly 21% as an internal lockdown period to sell shares ends. Ford owns a 102 million share stake in the company and lost money on the deal.
Investors are waiting for an important indicator of inflation, the Consumer Price Index, later this week.
“If you want to be a glass-half-full kind of person, the lack of new bad news is something to cling to and Wednesday should see US core and CPI inflation fall back,” the Société strategist wrote. General, Kit Juckes, in a note this Monday. A drop in inflation could “calm markets sufficiently” and reverse the weekend sell-off, he said.
Still, with earnings season drawing to a close, forecasts for the next quarter remain weak. Mentions of ‘weak demand’ in earnings reports are now at their highest level since the second quarter of 2020, according to a Bank of America analyst survey.
“Our guidance index, earnings review index and corporate sentiment reading all fell to the lowest since [o segundo trimestre de 2020],” they wrote, “raising recession concerns.”
Source: CNN Brasil
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