May 23, 2022

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Why did the stock market fall?  The Dow ended 1,000 points lower on the worst day since October 2020

Why did the stock market fall? The Dow ended 1,000 points lower on the worst day since October 2020

US stocks fell sharply on Friday to suffer their biggest one-day drop since 2020, as investors continued to balance the hawkish statements on interest rates the previous day by Federal Reserve Chairman Jerome Powell, as well as a fresh batch of disappointing corporate earnings. Highly hopeful.

How did the shares trade?
  • Dow Jones Industrial Average DJIA,
    -2.82%
    It fell 981.36 points, or 2.8%, to close at 33811.40 points, after falling 1019 points at the lowest level in the session. The blue chip gauge saw its biggest one-day percentage loss since October 28, 2020.

  • S&P 500 SPX Index,
    -2.77%
    It fell 121.88 points, or 2.8%, to close at 4271.78 points.

  • Nasdaq Composite,
    -2.55%
    It ended at 12839.29 points, after declining 335.35 points, or 2.6%. The S&P 500 and Nasdaq both suffered their biggest one-day declines since March 7.

On Friday, the Dow and S&P 500 indexes hit their lowest levels since March 15, while the Nasdaq closed at its lowest level since March 14.

employment Thursday, stocks gave up their strong gains, reversing sharply lower trend. With Friday’s decline, the Dow suffered a weekly decline of 1.9%, its fourth consecutive loss. The S&P 500 fell 2.8% and the Nasdaq tumbled 3.8%, its third consecutive weekly decline.

What drove the market?

Stock market weakness rebounded on Friday as selling stalled on Thursday, when stocks tumbled in the afternoon after Powell added his support for Move faster to raise interest ratesTo cool inflation, measures that would include the possibility of a 50 basis point interest rate hike in May.

“It seems that the investors were very satisfied with the future [Fed] “The meeting, which will need to change,” said Michael Kramer, founder of Mott Capital, in a note.

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Cboe VIX Volatility Index,
+ 24.38%And
The options-based measure of volatility expected over the next 30 days, Cramer said, was very low ahead of the May 3-4 FOMC meeting. It rose on Thursday and rose another 19.5% at 27.1 on Friday, moving above its long-term average just under 20.

Kramer said Powell’s comments appear to have raised interest rates by half a percentage point from the core issue, and the central bank is also likely to announce the start of resolving its balance sheet.

Meanwhile, Fed Funds futures traders priced in 94% chance that the Fed will raise rates by 75 basis points in June, up from 70% on Thursday and 28% a week ago, according to the CME FedWatch Tool.

Stocks pared losses somewhat in the afternoon activity after Cleveland Fed President Loretta Meester said in a TV interview that she remained in favor of a 50 basis point rate hike, but saw No need to shock a 75 basis point increase. The rebound proved short-lived, with stocks dropping to new session lows before the closing bell.

Standard 10-year Treasury yield TMUBMUSD10Y,
2.917%And
Meanwhile, it eased slightly to about 2.89% after climbing about 8.1 basis points to 2.917% on Thursday, its highest level since Dec. 4, 2018.

Read: How to invest in light of inflation, high interest rates and turbulent markets

The Fed’s hawkish shift and the continued rise in Treasury yields may weaken the appeal of ex-equities, which was previously seen as the only viable avenue for many yield-seeking investors.

“Investors seem to be moving away from the TINA (no alternative) narrative lately when it comes to stocks,” Brian Price, head of investment management at Commonwealth Financial Network, said in a note. “This is the second week in a row of significant outflows from equity mutual funds, and days like today are unlikely to change sentiment going forward. The only positive conclusion might be that sentiment has turned very bearish and we could see a rally in the opposite direction at some point. in the coming weeks.”

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In one scheme: Investors just pulled $17.5 billion from global stocks. Bank of America says they are just getting started.

All 11 major S&P 500 sectors fell on Friday, with Healthcare down 3.6% after that Pessimistic earnings forecast From HCA Healthcare Inc. HCA,
-21.82%
It sent its shares down 21.8%. Other hospital operators, including Tenet Healthcare Corp. THC,
-15.65%And
CYH Community Health Systems Corporation,
-17.93%
and UHS comprehensive health services,
-13.96%
It also fell between 14% to 17.9%.

However, of the 99 S&P 500 companies that reported first-quarter earnings, 77.8% beat market expectations. Typically, 66% of companies beat estimates, according to Refinitiv data.

Saxo noted that next week will mark another significant earnings week, with 558 companies reporting. “It’s the big test of companies’ ability to pass costs on to their customers,” they said.

Investors may also be volatile ahead of the latest round of France’s presidential election on Sunday. Analysts said the surprise victory of far-right candidate Marine Le Pen over incumbent President Francois Macron is likely to lead to volatility in the market.

be seen: Here’s how the markets are setting for Sunday’s presidential election in France between Macron and Le Pen

What companies have been focused on?
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How did you trade other assets?
  • ICE DXY US Dollar Index,
    + 0.54%
    It rose 0.5% to its highest level since March 2020.

  • Bitcoin BTCUSD,
    + 0.08%
    It fell 4.5% to trade near $39,400.

  • American oil standard CL.1,
    -1.97%
    It fell $1.72, or 1.7%, to settle at $102.07 a barrel on the New York Mercantile Exchange, It fell 4.1% during the week.

  • GC00 gold,
    -0.81%
    It fell $13.90, or 0.7 percent, to settle at $1,934.30 an ounce.Ga 2.1% weekly fall.

  • The Stoxx Europe 600 SXXP,
    -1.79%
    It is down 1.8% while the FTSE 100 UKX Index in London is down,
    -1.39%
    It fell 1.4%.

  • Shanghai SHCOMP Compound,
    + 0.23%
    It rose 0.2%, while the Hang Seng HSI index rose,
    -0.21%
    It fell 0.2% in Hong Kong and Japan’s Nikkei 225 index,
    -1.63%
    It fell 1.6%.