NPR April 29 2022 “Here are 3 reasons why stocks are tanking” by David Gura
Read, listen or watch NPR for all the details. Also see talkmarkets.com source of charts below.
Summary by 2244
Image from WIX.COM
S&P500 (SPX) red line showing level 10/28/21 to 4/29/2022. Blue line NYSE. Image from talkmarkets.com
NASDAQ (OTC) blue line showing level 10/28/21 to 4/29/2022. Red line OTC HL ratio.
No surprise even to casual watchers that the party train for stocks over the last few years has come to an abrupt end (see charts above of the last six months for the S&P500 and NASDAQ).
Calculations by 2244 show that the Dow Jones hit a peak of 36,407 January 5th ended yesterday at 32,977 or -9.4%, the NASDAQ hit a peak of 15,973 November 16th 2021 ended yesterday at 12,335 or -22.8%, and the S&P500 hit a peak of 4,791 on December 27th 2021 ended yesterday at 4,131 or -13.8%. April 2022 put an exclamation point on the trend contributing 4.9% of the 9.4% loss from peak for the Dow (52% of the fall), 13.2% of the 22.8% loss from peak for the NASDAQ (58% of the fall) and 8.8% of the 13.8% (64% of the fall) loss from peak for the S&P500.
According to NPR, “the deep declines, [April 2022 being the worst month since 2008], reflect a time of deep uncertainty at a moment when the economic landscape is changing rapidly.”
Three Reasons
“Big Tech is going from winner to loser” reflected by the shocking 22.8% fall from the peak on November 16th, 2021. The pandemic fueled by quarantines, work from home and low interest rates boosted the Tech-heavy NASDAQ and even the S&P500 benefited as Tech comprise 28% of the index. But that all turned around quickly as COVID eased, workers began returning to office and even shoppers ventured out to bricks and mortar stores rather than just odering online. Many Tech stocks took a hit the most relevant to all these was Amazon who reported on Thursday “its first quarterly loss since 2015.”
“The Fed is fighting inflation-and it could get rough” as America is experiencing the highest inflation in 40 years. Investors now worry that the Fed “will [not be] be successful [in] fighting” this “persistent [and] pernicious problem for the U.S. and global economies.” Lori Calvasina (RBC Capital) comments that the market favors the “Fed to fight this fight” but that it is “unsettled by the idea of these big, chunky, kind of quick increases” Unlike 2008, experts are concerned about an economic impact of the current environment but don’t see recession as a “likely outcome.”
“Then there’s China and the war in Ukraine” creating “a challenging geopolitical environment.” Adding to the supply-train woes that have helped fuel inflation, China is again battling COVID and locking down large cities like Shanghai causing the government to close “ports and factories.” Finally, “Russia’s invasion of Ukraine continues to impact companies while putting pressure on commodity prices.” Oil is up from $70-$80/Barrel to $100. With America and allies invoking strong economic sanctions on Russia, prices for “grains and metals” are increasing.