Wall Street’s losses worsened as markets faltered around the world

Stan Choi and Alex Vega, The Associated Press

Date: May 9, 2022 5:34 PM EST

NEW YORK (AP) – Stocks took further losses on Wall Street on Monday, leaving the S&P 500 index at its lowest point in more than a year.

The sell-off came as renewed concerns about the Chinese economy piled up on top of global financial markets already hit by rising interest rates.

The S&P 500 fell 3.2%, deepening its losses after five consecutive weeks of decline, the longest streak of its kind in more than a decade.

The Dow Jones Industrial Average is down 2% and the Nasdaq Index is down 4.3% as tech-oriented stocks once again took a beating. Monday’s sharp drop sent the S&P 500 Index, Wall Street’s main gauge of health, down 16.8% from its record high earlier this year.

Wall Street’s decline came on the heels of the global swoon in the markets. Not only did stocks fall across Europe and much of Asia, but so did everything from crude oil in the old economy to bitcoin in the new economy. Bond yields and the price of gold also fell.

Among US stocks, the energy sector, which has been the star performer in recent weeks, was responsible for some of the biggest declines with lower oil and gas prices. Marathon Oil and APA Corp sank more than 14%.

“Basically, investors are finding it very difficult to find a place to hide,” said Sam Stovall, chief investment analyst at CFRA. “Traditional safe havens, like defensive sectors or like bonds, are not doing well. Commodities are not doing well.”

The S&P 500 fell 132.10 to 3,991.24. The Dow Jones fell 653.67 points to 32,245.70 points. The Nasdaq fell 521.41 points to 11,623.25.

Shares of smaller companies also fell broadly. The Russell 2000 Index lost 77.48 points, or 4.2%, to 1762.08 points.

Most of the damage this year has been from the Federal Reserve’s aggressive reversal away from doing all it can to support financial markets and the economy. The central bank has already pulled its key short-term rate off its record low near zero, sitting with almost all of the pandemic. Last week, he signaled additional increases of twice the usual amount that may arrive in the coming months, hoping to stem the high inflation gripping the economy.

Moves by design will slow the economy by making it more expensive to borrow. The risk is that the Fed could cause a recession if it raises interest rates too much or too fast. Meanwhile, high rates discourage investors from paying very high prices for investments, because investors can get a better return from owning ultra-secure Treasuries than they could have just a few weeks ago.

This has helped a nearly 29% drop in bitcoin since the beginning of April, for example. It fell 9.7% on Monday, according to Coindesk.

Concerns about the world’s second largest economy added to the gloom on Monday. Analysts cited comments made over the weekend by a Chinese official warning of a dangerous job situation, as the country hopes to stem the spread of COVID-19.

Authorities in Shanghai have tightened restrictions again, amid citizens’ complaints that they are endless, just as the city was emerging from a month of strict lockdown following the outbreak.

The fear is that China’s tough anti-COVID policies will add more disruption to global trade and supply chains, while putting pressure on its economy, which for years has been a major driver of global growth.

In the past, Wall Street has experienced similar pressures due to the strong earnings growth that the companies have been producing.

But the latest earnings-reporting season for large US companies has been less enthusiastic. Companies generally report greater earnings than expected, as is usually the case. But disappointing indications of future growth were plentiful.

Strategist Savita Subramanian wrote in a BofA Global Research report that the number of companies citing “weak demand” in their conference calls after earnings reports jumped to the highest level since the second quarter of 2020. She said technology earnings are also lagging.

The technology segment is the largest in the S&P 500 by market capitalization, which gives it additional weight to market moves. Many tech-oriented companies have seen profits boom during the pandemic as people search for new ways to work and entertain themselves while confined to the home. But the slowdown in earnings growth leaves their shares vulnerable after their prices rose sharply amid expectations of continued gains.

The high interest rates designed by the Federal Reserve are also hitting tech stocks hard because they are seen as some of the most expensive in the market. The Nasdaq Composite’s 25.7% loss for 2022 so far is more severe than that of the other indices.

Electric car maker Rivian Automotive fell 20.9% Monday as restrictions that prevented some large investors from selling their shares after they debuted on the stock market six months ago expired. The company has lost more than three-quarters of its value this year so far.

The yield on 10-year Treasuries rose to its highest level since 2018 with rising inflation and Fed action expectations. It was moderate on Monday, falling to 3.03% from 3.12% late Friday. But it’s still more than double where it started the year.

Oil prices fell, which negatively affected energy stocks. The price of US benchmark crude fell 6.1 percent to settle at $103.09 a barrel, although it is still up about 40 percent this year. International benchmark Brent crude fell 5.7 percent to settle at $105.94 a barrel.

Business writer Yuri Kageyama contributed to the AP. Veiga reported from Los Angeles.

2022-05-09 21:34:21

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