A drop in the shares of Amazon.com and other tech stocks propelled the S&P 500 down Friday into its worst month since March 2020.
The broad stock index fell 2.4% as losses mounted in the afternoon, and the Dow Jones Industrial Average fell more than 500 points, or 1.7%. The technology-focused Nasdaq Composite fell about 2.9%.
The tumultuous week, littered with earnings results from some of the largest US companies, is closing a difficult trajectory for major indices. The Nasdaq Composite is down about 12% this month, continuing a penalty for the start of the year. The S&P 500 fell 7.7% in April. Both indices had their worst year-on-year starts in decades.
Concerns about the Federal Reserve’s rate hike, rising inflation and the economy’s price have left equities well below the records they started the year with. Many pandemic-era winners have also fallen back to Earth as consumer tastes have evolved since 2020. Recently, the earnings season was riddled with some high-profile group disappointments, sparking groundbreaking moves after the reports.
Throughout the month, investors have dumped shares of some of the largest tech companies, which had been the stock market’s darlings for much of the past decade, leading the market upward from the March 2020 lows. Very quickly, some of the most reliable winners of recent years have become losers, pushing the market lower.
The FAANG Stocks, Made Up of Facebook Mother Meta’s Popular Quintet†
Apple, Amazon.com, Netflix and Google parent Alphabet†
have collectively lost more than $1 trillion in market value this month, the most since Facebook began trading in May 2012.
Amazon shares fell 14% in afternoon trading, en route to its biggest one-day drop since at least 2014. The company posted its first quarterly loss in seven years — a result that reflected broad economic trends associated with a slump in online shopping, higher costs of inflation and supply chain problems, and market jitters over electric vehicle startups.
Apple warned on Thursday that the resurgence of Covid-19 in China threatens to hamper sales by as much as $8 billion in the current quarter. The stock fell 0.7% in recent trading. Last week, Netflix shares plunged more than 30% after its earnings report revealed the company was losing subscribers. Moves in major technology companies can have a major impact on major stock indices because of their higher weighting relative to other stocks.
“We are moving to a higher volatility regime when fundamentals matter again,” said Aashish Vyas, investment director at Resonanz Capital. “Looks like we’re in a systemic shift.”
Of course, some companies have impressed investors with their latest reports. Investors applauded a solid earnings report from Meta Platforms, which saw it make up for some of its losses this year, though the stock remains nearly 40% lower in 2022.
For much of the month, many traders and market watchers remained fixated on the drama surrounding Twitter, when Tesla CEO Elon Musk took a stake in the company and then struck a deal to buy it. The tweets and negotiations throughout the process caused intense volatility in the shares of both companies. Twitter shares are up 29% this month, while Tesla shares have lost 16%.
Shares of Tesla recently added 4.3% after Chief Executive Elon Musk disclosed that he had recently sold about $4 billion worth of shares in the electric car maker to fund his takeover of Twitter, but said there would be no further sales are planned.
Many investors have become more concerned about a recession, causing fluctuations in global markets. The war in Ukraine has pushed commodity prices up while inflation has been high for 40 years. Meanwhile, the Federal Reserve has embarked on a path to raise interest rates, but it faces a particularly difficult path to tame inflation without substantially raising unemployment.
The latest gross domestic product data shows that the economy has been contracting lately, with a warning sign.
According to economic data, the Fed’s preferred measure of inflation, the personal consumption expenditure index measure of core inflation, which excludes volatile food and energy costs, rose 5.2% in March from a year earlier. US consumer spending rose 1.1% in March from the previous month.
“The reality is that after weeks of this lockdown, we are going back to supply chain disruptions that could impact inflation and put central banks in difficult positions,” said Esty Dwek, chief investment officer at FlowBank. “We had seen the beginnings of improvements in supply chains, but that is likely to reverse if these lockdowns in China last longer.”
The massive swings have not been limited to technology stocks alone. The broad-based S&P 500 is down about 11.5% this year, heading for its worst four months since 1942. Investors around the world are also alarmed by the dramatic shifts in assets from currencies to bonds.
In the bond markets, the benchmark 10-year government bond yield is on track to record its biggest monthly gain since 2009. It recently hovered at 2.906%.
In the currency markets, the dollar has risen, while the yen has collapsed. The yen, a quintessential safe haven for investors around the world, has fallen to a 20-year low against the dollar, reversing typical dynamics in global markets and sparking investor unrest.
The WSJ Dollar Index, which measures the US currency against a basket of 16 others, fell 0.4% on Friday, but has strengthened against other currencies this year ahead of Fed rate hikes, which are expected to accelerate faster. and will take place more aggressively than in the eurozone and Japan.
Brent oil, the international benchmark for oil, rose 1.6% in recent trading to $108.96 a barrel. Moscow’s cut off of gas supplies to some countries has worried traders about further disruptions as European countries try to distance themselves from Russian energy.
Overseas, the pan-continental Stoxx Europe 600 added 0.7%.
In Asia, Alibaba and other Chinese technology stocks rose double-digit on investors’ hopes that the Chinese government would do more to support the sector and the economy in general. The gains helped Chinese stocks recoup some of their recent losses, while the yuan also gained some ground against the dollar after selling sharply in recent sessions.
The Hang Seng index in Hong Kong gained 4%. The Shanghai Composite Index rose 2.4%.
write to Caitlin Ostroff at email@example.com
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