Stocks plunged on Monday as China’s economy is falling and curb inflation to the rising interest rates.
The S&P 500 hit its lowest point in a year and notched its fifth weekly loss in a row.
Everything from bitcoin to crude oil took a beating in the US, European and Asian markets.
Stocks deepened their losses on Wall Street Monday, sending the S&P 500 to its lowest close in more than a year.
The S&P 500 gave up 3.2 percent and the Nasdaq pulled back 4.3 percent. The Dow Jones Industrial Average fell 2 percent. The yield on the 10-year Treasury note fell to 3.03 percent.
The S&P 500 hit its lowest point in a year and notched its fifth weekly loss in a row
The Dow Jones Industrial Average fell 2 percent. The yield on the 10-year Treasury note fell to 3.03 percent
The fear is that China´s strict anti-COVID policies will add more disruptions to worldwide trade and supply chains
The Dow Jones Industrial Average dropped 374 points, or 1.1 percent, at 32,520, as of 3:16 p.m. Monday’s sharp drop leaves the S&P 500, Wall Street´s main measure of health, down roughly 16 percent from its record set early this year.
Most of this year´s damage has been done to the Federal Reserve´s aggressive flip away from doing everything it can to prop up the financial markets and the economy. The central bank has already bought its key short-term interest rate off its record low near zero, where it is almost all the pandemic for the sat. Last week, it signaled additional increases in double the usual amount of hits in recent months, and the high inflation sweeping economy.
The Federal Reserve’s aggressive flip away from doing everything it can to prop up the financial markets and the economy
Monday’s sharp drop leaves the S&P 500, Wall Street´s main measure of health, down roughly 16 percent from its record set early this year
Worries that rise in interest rates by the Fed could slow the economy down too much
The moves are designed to slow down the economy by making it more expensive to borrow. The risk is the Fed could cause a recession if it moves too far or too soon. In the meantime, higher rates of discouragement from investors than for high-priced Treasury bonds are available to investors.
That´s helped cause a roughly 29 percent tumble for bitcoin since April´s start, for example. It dropped 10.8 percent Monday, according to Coindesk. World’s second largest economy added to the gloom Monday. Analysts cited comments over the weekend by a Chinese official warning of jobs for a grave situation, as well as the country’s hopes for a spread of COVID-19.
Authorities in Shanghai have again tightened restrictions, amid citizen complaints that it feels endless, just as the city was emerging from a month-long strict lockdown after an outbreak.
The fear is that China´s strict anti-COVID policies will add more disruptions to global trade and supply chains, while dragging on its economy, which for years has been a key driver of global growth.
In the past, Wall Street has been able to remain steady with similar pressures because of its strong profit growth.
Big US companies have yielded less enthusiasm for the most recent earnings reporting season. Companies overall report higher profits than expected in the latest quarter, as is usually the case. But the future growth for discouraging signs has been plentiful.
Supply-chain disruptions could continue if China’s keeps it’s strict anti-covid policies
The number of companies citing ‘weak demand’ in their conference calls has jumped to the highest level since the second quarter of 2020, strategist Savita Subramanian wrote in a BofA Global Research report. Tech earnings are also lagging, she said.
The tech sector is the largest in the S&P 500 by market value, giving it additional market weight. Many tech-oriented companies saw profits boom through the pandemic as people looked for new ways to work and entertain while locked down at home. But slowdowns in their profit growth leave their stocks vulnerable after their prices shot so high that continued gains.
The higher interest rates are engineered by the Fed and they are hitting their stock prices much harder because they see some of the market’s most expensive. The Nasdaq Composite´s loss of roughly 25 percent for 2022 so far is far more sharper than other indexes.
Electric automaker Rivian Automotive slumped 19.1 percent Monday as restrictions expire that prevented some big investors from selling their stock market six months ago. It’s more than three quarters of its value so far this year.
The Fed action rose for inflation and expectations as the 10-year Treasury has shot to its highest level in 2018. It moderated Monday, dipping to 3.07 percent from 3.12 percent late Friday. But it’s still more than double the 1.51 percent level where it started.
In Asian stock markets, Japan’s Nikkei 225 fell 2.5 percent, and South Korea’s Kospi lost 1.3 percent. Shanghai inched up 0.1 percent in stocks.
In Europe, France´s CAC 40 fell 2.8 percent, and Germany´s DAX lost 2.1 percent. London’s FTSE 100 slid 2.3 percent.
Apart from concerns about inflation and coronavirus restrictions, the war in Ukraine is still uncertain for a major cause. More than 60 people have died after a Russian bomb was flattened, according to Ukrainian officials. Russia’s Victory Day holiday on Monday
Even the energy sector, a star performer in recent weeks, was under pressure Monday. Benchmark US crude fell 6.1 percent to settle at $ 103.09 per barrel, though it’s still up about 40 percent this year. Brent crude, the international standard, fell 5.7 percent to settle at $ 105.94 a barrel.