NEW YORK: The S&P 500 ended below 4,000 for the first time since late March 2021 and the Nasdaq dropped more than 4% yesterday in a selloff led by mega-cap growth shares as investors grew more concerned about rising interest rates.
The Nasdaq closed at its lowest level since November 2020. Apple shares dropped 3.3% and were the biggest weight on the Nasdaq and the S&P 500. Microsoft Corp dropped 3.7% and Tesla Inc fell 9.1%.
Investors are worried about how aggressive the Federal Reserve will need to be to tame inflation. The US central bank last week increased interest rates by 50 basis points.
Benchmark 10-year US Treasury yields hit their highest levels since November 2018 before easing yesterday.
“Markets are digesting the start of a return to a more normal monetary policy environment,” said Kristina Hooper, chief global market strategist at Invesco in New York.
“Moving more aggressively (on rates) raises the specter of a recession, especially with all of these complications – high inflation, Russia’s invasion of Ukraine, Covid-related supply chain disruptions,” she said.
“Investors still aren’t ready to buy the dip,” said Gregori Volokhine of Meeschaert Financial Services. “There is zero confidence it’s going to shift anytime soon, and it isn’t clear what the catalyst could be to turn things around.”
Investors have also been worried about an economic slowdown in China following a recent rise in coronavirus cases.
The Dow Jones Industrial Average fell 653.67 points, or 1.99%, to 32,245.7, while the S&P 500 lost 132.1 points, or 3.20%, to 3,991.24, its lowest close since March 31, 2021.
The Nasdaq Composite dropped 521.41 points, or 4.29%, to 11,623.25.
The S&P 500 is now down 16.3% for the year so far.
Among the hardest hit in the recent selloff have been technology and growth stocks, whose valuations rely more heavily on future cash flows.
All S&P 500 sectors ended lower yesterday except for consumer staples, which rose 0.1%.
The energy sector fell 8.3% as oil prices dropped. – Reuters, AFP