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September 17, 2022
11:52 am
US stocks closed the week sharply lower, tumbling in the Friday session to their lowest in two months, following FedEx’s warning of an impending global slowdown accelerated investors’ flight to safe havens at the conclusion of a turbulent week.
The three major US stock indexes fell to levels not seen since mid-July, with Standard & Poor’s closing below 3900 points, an important support level.
For a week, the Standard & Poor’s 500 Index fell by 194.03 points, or 4.8%, compared to the Dow Jones decreased by 1,329.29 points, or 4.1%, and the Nasdaq fell by 663.90 points, or 5.5%.
Since the beginning of the year, the “Standard & Poor’s” drop is 892.85 points, or 18.7%, compared to the Dow Jones’ decline of 5,515.88 points, or 15.2%, and the Nasdaq, 4196.57 points, or 26.8%.
Investor sentiment
Investor sentiment has shifted away from risk following FedEx withdrew its earnings forecast late Thursday, citing signs of waning global demand.
FedEx’s move followed comments from the World Bank and the International Monetary Fund, which warned of an impending global economic slowdown.
Investors betting the worst is over for battered tech stocks received a dire reminder this week that there is more gloom in store.
«S&P»
The market is swept by storms, as paranoia regarding inflation alternates with optimism that the economy can weather. On Tuesday, as more than 400 S&P 500 companies moved in the same direction, a pattern swung 79 times in 2022, a rate that, if continued, would exceed all the years since 1997.
The largest stock market in the world behaves like a giant trade whose direction is difficult on a daily basis. Tuesday’s sharp drop was the worst in two years, led by a higher-than-expected inflation reading.
This came following two consecutive sessions, where more than 400 companies rose from the “Standard & Poor’s 500”.
The index fell by 4.8% over the week to 3,873 points, erasing all the gains of the previous week. The index has now moved in opposite directions by at least 3% for three consecutive weeks – an extension not seen since December 2018.
Nasdaq 100
The Nasdaq 100 fell 5.8% in its worst week since January, following Tuesday’s inflation report indicated that prices may remain higher for longer than expected.
The loss was the index’s third weekly decline of 4% or more since the summer recovery ended in mid-August.
The Nasdaq remained above its year low on June 16, but the gap is narrowing and many of the biggest names in the technology sector are already reaching new depths. Meta, Facebook’s parent company, hit its lowest level since early 2019 following plunging 14 percent this week.
Meanwhile, chip maker Nvidia hit its lowest level in a year and a half following falling by 8%.
“Big tech is in more pain until inflation is resolved,” said Matt Malley, chief market strategist at Miller Tabak + Co. Markets still need to adapt to the fact that we no longer have massive levels of liquidity and artificially low interest rates.”
Traders are betting that another interest rate increase of three-quarters of a percentage point is guaranteed when officials meet next week. Any hints they provide regarding the future pace of tightening will help determine the direction of the economy and technology stocks in the coming weeks.
For some investors, this week’s sell-off represents another good opportunity to acquire technology stocks such as Microsoft at cheaper rates.
Roar Buck Phil Blancato, CEO of Ladenburg Thalmann Asset Management, remains optimistic that inflation may subside in the coming months, allowing the Federal Reserve to halt its rate hike campaign.
Erica Clauer, portfolio manager at Jennison Associates, is taking a more cautious approach given the amount of uncertainty around the Fed’s fight once morest inflation, although she believes the long-term growth trends of companies with disruptive technologies remain intact.
Europe shares
European shares lost 1.6 percent, Friday, as warnings from two global financial institutions of recession, as well as expectations of a sharp interest rate hike by the US Federal Reserve next week, weighed on sentiment.
The decline pushed the European Stoxx 600 index to record its worst weekly performance in three months, down 2.9 percent.
With the exception of the real estate sector, all major sector indices declined, led by the industrial, healthcare and financial institutions sectors.
The World Bank said late that the global economy may be slowly heading into recession as central banks try to rein in inflation. The International Monetary Fund also said it expects a slowdown in the third quarter.
Attention now turns to the US Federal Reserve, which is expected to raise interest rates by 75 basis points for the third time this year, following having already raised them by 225 basis points so far in 2022.
The Stoxx 600 index has fallen by 1.7 percent in September so far, and is heading for a second consecutive month of decline, with investors worried regarding rising prices and the region’s energy crisis.
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