Tech stocks lead the Nasdaq much lower on Wall Street

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Tech stocks took another beating on Monday as many investors dumped shares of well-known companies, concerned about the outlook for slow growth, higher inflation and higher interest rates.

The Nasdaq closed more than 4.3% on Monday as investors moved away from tech stocks like Amazon and Tesla. After recording its worst month since 2008 in April, the index suffered even more losses in May, with many large companies at risk of wiping out the gains they had enjoyed during earlier phases of the pandemic, boosted by the boom in the economy. everything remotely. The tech-heavy index is down 25% year-to-date, according to MarketWatch.

The recent stock market plunge is one of many indicators economists are watching closely as they try to predict the overall direction of the economy. At 3.6%, the unemployment rate remains very low, but growth has slowed markedly and the economy has actually contracted in the first three months of 2022. Tech companies led a broad stock market rally shortly time after the start of the pandemic, but there was a sharp reversal. These last months.

Tech companies saw sales surge during the early stages of the pandemic as customers sought out products and services that could keep them connected while they isolated at home. Some companies cram five years of growth into two years. But now, as investors react to the prospect of a sluggish economy, big business is also paying the price for high inflation and the possibility of a recession.

If consumers cut spending, investors don’t know if streaming subscriptions, online shopping and the latest smartphones and gadgets will disappear from consumers’ shopping lists.

“It’s a perfect storm for investors with nowhere to hide as Fed hikes, inflation, geopolitical issues and concerns about a recession abound,” chief executive Dan Ives said Monday. general of Wedbush Securities. “Tech stocks are being crushed on this flight to safety, and it’s a bear market mentality with the pain threshold tested for tech investors.”

Apple kicked off 2022 by becoming the first company to be worth $3 trillion. But in just a few months, despite posting record earnings last quarter, its share price has fallen more than 16%. Microsoft shares fell 20%, dragging its valuation below the $2 trillion mark. Amazon fell 5% on Monday and is down more than 35% for the year. Facebook, meanwhile, is down 40% and has instituted a hiring freeze, which is considered a type of layoff in Silicon Valley.

The broader S&P 500 slid more than 3.2% to a new low in 2022 after posting its longest weekly losing streak since 2011.

The Dow Jones Industrial Average fell more than 650 points, or 2%, racking up more pain after the blue chip index suffered its worst beating since the early days of the pandemic last week.

Cryptocurrencies, whose movements have followed the Nasdaq in recent months, have continued to slide. After a temporary Federal Reserve-induced hike last week took it above $40,000, bitcoin was trading up more than 5% on Monday at $32,760. Ethereum, another popular cryptocurrency, also fell more than 6% to $2,386.

“The psychology of the market is driven by greed and fear,” said Wayne Wicker, chief investment officer at MissionSquare Retirement. “Market volatility today is driven by uncertainty about the future rate of inflation and what action the Fed will take in its attempt to stifle price increases.”

After an initially positive reaction to the Fed’s interest rate hike on Wednesday – the second of seven scheduled for 2022 – investors wrung their hands over the central bank’s approach to curbing inflation, this which could make borrowing more costly for businesses and households.

Fed officials are trying to raise interest rates at a pace that doesn’t completely stifle economic growth, a difficult balance to strike. If the economy cools too quickly, it could slide into a recession, generally defined as two consecutive quarters of decline.

Investors seem to lack confidence in the ability of the central bank to control inflation without triggering a recession. Cboe’s VIX, known as the “Wall Street Fear Gauge,” is up nearly 99.5% year-to-date, according to MarketWatch.

“You have to look pretty carefully for positive catalysts in the current market environment,” said Brian Price, head of investment management at Commonwealth Financial Network. Although the outlook has turned pessimistic, “any positive developments on the geopolitical front, or weaker-than-expected growth [consumer price index] report later this week, could help turn the tide and see investors embrace risky assets again.

Tyson Foods raised its full-year sales outlook as it reported earnings and revenue that beat analysts’ expectations on Monday, its performance rattled by price increases the company said it implemented to offset the rise. labor costs and inflation.

“While we continue to see inflationary pressures in the supply chain, we are working to reduce costs by continuing to increase our efficiency, productivity and bringing more capacity online,” said the managing director of Tyson, Donnie King, in the company’s earnings report.

In Asia, markets closed sharply lower as the weight of China’s zero-tolerance coronavirus restrictions continued to weigh on business activity in the region. Hong Kong’s Hang Seng index closed down 3.8%, while Japan’s Nikkei 225 fell 2.5%. The Shanghai Composite Index was virtually flat.

European markets closed negative across the board, with the benchmark Stoxx 600 down 2.9%.

“The continued impact of Beijing’s zero-covid policy in China and concerns over the Fed’s next actions are contributing to increased pressure on markets,” said Russ Mould, chief investment officer at AJ Bell. “The impact of Chinese restrictions was reflected in export growth which hit its lowest level in two years in April – in fact where we were near the start of the pandemic.”

Oil prices eased somewhat after Japan became the latest Group of Seven country to ban imports of Russian oil. Brent crude, the international oil benchmark, edged down 0.8% to trade around $105 a barrel. West Texas Intermediate, the US oil benchmark, fell 6.8% to trade around $102.30 a barrel.

Unease permeated bond markets, which briefly pushed the yield on the 10-year U.S. Treasury note past 3.185% on Monday, its highest level since November 2018. Bond yields move inversely to prices.

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