May 23, 2022

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Dow tanks 900 points as S&P 500 and Nasdaq hit worst month since March 2020

Dow tanks 900 points as S&P 500 and Nasdaq hit worst month since March 2020

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The Dow Jones fell more than 900 points on Friday as Wall Street wrapped up a dismal April month marked by investors wrangling over rising interest rates, persistent inflation, corporate earnings and global turmoil.

The Dow Jones Industrial Average lost 939.18 points, or 2.8 percent, to close at 3,2977.21 points. The Standard & Poor’s 500 Index fell by 155.57 points, or 3.6 percent, to fall at 4,131.93 points. The Nasdaq index, home of technology stocks that suffered heavy losses, fell 536.89 points, or 4.2 percent, to settle at 12,334.64.

The S&P 500 fell 9.1 percent in April, its worst month since March 2020. It fell 13.8 percent in 2022, its worst start to the year since World War II, according to an analysis by CFRA Research chief investment analyst Sam Stovall. The Nasdaq fell 13.5 percent in April, its worst month since the start of the pandemic, while the Dow was down 5.3 percent.

A bad April also has the potential to raise concerns among economists and traders alike about the outlook for the rest of the year.

There are plenty of macro indicators that the worst may be imminent. Tech companies were hit hard, with shares of Amazon, Apple and Google parent Alphabet all posting a 10 to 25 percent drop in April.

Amazon, whose founder Jeff Bezos owns The Washington Post, lost 14% of its stock price, $406 per share, on Friday alone.

It appears that the Federal Reserve is ready to increase borrowing rates to between 3 and 3.25 percent, According to contracts restricted by the power to set pricesIn order to stave off more inflationary pressures.

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Inflation jumped in March to 8.5 percent, but a narrower core PCE price index, which strips out further fluctuations in food and energy costs, showed signs of slowing.

Internationally, Russia on Thursday suspended exports of fossil fuels to Poland and Bulgaria, driving down energy prices. On Friday, Brent crude was trading at $109 a barrel, and RBOB gas, the standard for US gasoline, was selling for $3.46 a gallon.

Chinese health authorities have also instituted near-total lockdowns in Beijing and Shanghai, the country’s two largest cities, to combat rising rates of COVID-19 cases, throwing already strained supply chains into disarray.

Altogether, the economy during the three months of 2022 contracted by 1.4 percent, raising fears of a recession, defined as two consecutive quarters of economic downturn.

“Markets are finally facing the economic and geopolitical reality: All is not well,” said George Paul, chairman of Houston-based financial services firm Sanders Morris Harris.

“Markets are concerned that the Fed is raising interest rates to slow, and thus is making a major, unintended policy mistake,” said Jamie Cox, managing partner at Harris Financial Group. In other words, events around the world are slowing economic growth, particularly in Europe and Asia, with no clear signs of abating. As yesterday’s negative GDP suggests, the repercussions are here at home as well. So, instead of simply repricing the value of cash flows at the expected path of rates, markets are taking the slack into account.”

But economists welcomed other signs, even as investors searched for safe havens. Corporate earnings have been largely positive. Meta, the parent company of Facebook and Instagram, has reported user growth after warnings were raised in previous quarters that it was losing younger users to start-up video sharing platform TikTok.

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Twitter stock rose 25.7 percent after giant Elon Musk secured financing to buy the company. Its electric car maker, Tesla, lost 20 percent, forcing it to sell an additional $8.4 billion in stock to secure cash for its $44 billion Twitter acquisition.

Services and natural resources companies outperformed during the month of April. Proctor & Gamble has earned nearly $8 per share, or 5.2 percent. Health insurance giant Humana earned just over $9 a share, or 2 percent. Arkansas-based poultry producer Tyson Foods Inc., and Marathon Petroleum Corp. added 4 percent and 2.4 percent, respectively.

“Manufacturing and services numbers look good. Consumer spending is still good. The only disruption is all the things we import from China because of the shutdowns in Shanghai,” said Louis Navlieri, who heads an investment firm in Renault, Neville.

On the consumer front, personal income grew 0.5% in March, federal data showed, leading to a larger-than-expected increase in consumer spending. Walmart was one of the beneficiaries, with shares up just over 3 percent in April.

Although the upcoming Fed rate hikes are worrying large investors, economists are optimistic that labor costs and inflation may stabilize soon.

“Nothing is about to go wrong in an economy where the consumer is still encouraging the way forward to prosperity,” Chris Robke, chief economist at market research firm FWD Bonds said in a Friday note. “There is no recession in sight yet.”

Then the sell-off occurred on Friday. Rubie’s review his rating in a note after closing.

“The stock market has collapsed, and the leading indicators are showing that the economy is going to collapse,” he said. “see below.”

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Kate Rabinovich and Doug MacMillan contributed to this report.