Shares fell on Monday amid concerns about the Chinese economy slowing and rising interest rates to curb inflation.
The S&P 500 reached its lowest point of the year and recorded its fifth weekly loss in a row.
Everything from bitcoin to crude oil has been beaten in American, European and Asian markets.
Shares deepened their losses on Wall Street on Monday, sending the S&P 500 to its lowest close in more than a year.
The S&P 500 fell 3.2 percent and the Nasdaq 4.3 percent. The Dow Jones Industrial Average fell 2 percent. Yields on ten-year treasury bills fell 3.03 percent.
The S&P 500 reached its lowest point of the year, recording its fifth weekly loss in a row
The Dow Jones Industrial Average fell 2 percent. Yields on ten-year treasury bills fell 3.03 percent
Fears that China’s tough policy against COVID will further disrupt world trade and supply chains
The Dow Jones Industrial Average fell 374 points, or 1.1 percent, to 32,520, at 15:16 Eastern Time, and the Nasdaq Composite Index was 3.4 percent lower as technology-oriented stocks took over the sell-off again. Monday’s sharp drop leaves the S&P 500, Wall Street’s main measure of health, by about 16 percent from a record set earlier this year.
Most of this year’s damage is the result of the Federal Reserve’s aggressive refusal to do everything in its power to support financial markets and the economy. The central bank has already withdrawn its key short-term interest rate from a record low of close to zero, where it has been for almost the entire pandemic. Last week, it signaled additional increases twice the usual amount that could come in the coming months, hoping to halt the high inflation that has gripped the economy.
Most of this year’s damage is the result of the Federal Reserve’s aggressive refusal to do everything in its power to support financial markets and the economy.
Monday’s sharp drop leaves the S&P 500, Wall Street’s top health measure, down about 16 percent from a record set earlier this year
Concerns that rising interest rates by the Fed could slow the economy too much
Designed moves will slow the economy by making borrowing more expensive. The risk is that the Fed could cause a recession if it moves too far or too fast. Meanwhile, higher rates discourage investors from paying very high investment prices, as investors can instead get more than before by owning super-safe treasury bonds.
This, for example, has led to a drop in bitcoin of approximately 29 percent since early April. It fell 10.8 percent on Monday, according to Coindescu. Concerns about the world’s second-largest economy on Monday added to the darkness. Analysts cited comments from a Chinese official who warned over the weekend of a serious job situation as the country hopes to halt the spread of COVID-19.
Authorities in Shanghai have tightened restrictions again, amid complaints from citizens that it seems endless, just as the city was emerging from a month of strict closure following the outbreak.
Fears that a strict Chinese policy against COVID will further disrupt global trade and supply chains, while hampering its economy, which has been a major driver of global growth for years.
In the past, Wall Street has been able to remain stable despite similar pressures due to strong profit growth that companies have produced.
But this final season of earnings reporting for large U.S. companies has sparked less enthusiasm. Firms generally recorded higher-than-expected last-quarter profits, as is usually the case. But there have been many discouraging signs for future growth.
Supply chain disruptions could continue if China keeps its strict anti-Covid policy intact
The number of companies that cited ‘weak demand’ in their conference calls after earnings reports has jumped to its highest level since the second quarter of 2020, strategist Savita Subramanian wrote in a BofA Global Research report. Technological earnings are also lagging behind, she said.
The technology sector is the largest in the S&P 500 in terms of market value, which gives it additional weight for market trends. Many technology-oriented companies have experienced profit growth through the pandemic as people sought new ways to work and have fun while locked up at home. But the slowdown in their earnings growth leaves their stocks vulnerable after their prices fell so high in anticipation of further growth.
The higher interest rates devised by the Fed also hit their stock prices particularly hard as they are seen as some of the most expensive on the market. The Nasdaq Composite’s loss of approximately 25 percent for 2022 so far is much sharper than that for other indices.
Electric carmaker Rivian Automotive fell 19.1 percent on Monday after restrictions expired that prevented some large investors from selling their shares after its stock market debut six months ago. So far this year, it has lost more than three-quarters of its value.
Yields on the 10-year treasury reached their highest level since 2018 as inflation and expectations for Fed action rose. It was moderate on Monday, falling to 3.07 percent from 3.12 percent late Friday. But that’s still more than twice the 1.51 percent level at which the year began.
On Asian stock markets, Japan’s Nikkei 225 fell 2.5 percent and South Korea’s Kospi 1.3 percent. Shares in Shanghai rose 0.1 percent.
In Europe, the French CAC 40 fell 2.8 percent and the German DAX 2.1 percent. London’s FTSE 100 fell 2.3 percent.
Aside from concerns about inflation and restrictions on coronavirus, the war in Ukraine is still a major cause of uncertainty. More than 60 people are feared to have died after a Russian bomb toppled a school used as a shelter, Ukrainian officials said. Moscow forces attacked defenders inside the Mariupol steel plant in an apparent race to capture the city ahead of Russia’s Victory Day on Monday.
Even the energy sector, which has been a star in recent weeks, was under pressure on Monday. The reference U.S. crude fell 6.1 percent to $ 103.09 a barrel, although it is still up about 40 percent this year. Brent crude, an international standard, fell 5.7 percent to $ 105.94 a barrel.