In this photo, provided by the New York Stock Exchange, trader Philis Arena Woods is working on the floor on Monday, January 24, 2022. (Courtney Crow / New York Stock Exchange via AP)
New York (AP) — Shares plunged on Monday as investors expected inflation from the Federal Reserve and feared a possible conflict between Russia and Ukraine.
The stock market extended its three-week decline and put the Benchmark S & P 500 on track for a so-called revision. This has fallen by more than 10% from the latest highs. Prices of oil and Bitcoin have fallen, and yields on 10-year government bonds have also fallen. This shows that investors are expressing concern about the economy.
The steady decline in stock prices has shown that the Fed is ready to raise benchmark short-term interest rates in 2022 to curb inflation, which is at its highest level in nearly 40 years.
Since the pandemic hit the global economy in 2020, the FRB’s short-term interest rates have been fixed at near zero, which has spurred consumer and corporate borrowing and spending.
However, rising prices in supermarkets, car lots and gas stations have raised concerns that consumers will cut spending to limit pressure on their budgets. Companies warn that supply chain issues and rising raw material costs can weigh on profits.
The Federal Reserve has continued to put downward pressure on long-term interest rates by buying trillions of dollars worth of government and corporate bonds, but these urgent purchases are expected to end in March. Higher nudge rates are aimed at helping slow economic growth and inflation.
By early afternoon, sales had lost momentum. As of 2:20 pm in the east, the Dow fell 598 points (1.8%) to 33,570 after falling more than 1,000 points. The S & P 500 fell 2% to 4,310, down about 10.1% from the closing price set on January 3rd. Closing prices below 4,316.90 will be revised. Nasdaq decreased by 1.8% after an early decrease of 4.9%.
Sylvia Jablonski, Chief Investment Officer of the Defiance ETF, said:
Jablonski said investors did not rush to buy stock during the recent downturn. “Purchasing dips” was a hallmark of market optimism most of the time after the 2008-2009 financial crisis.
Technology stocks led the decline. Higher rates make high-flying tech companies and other expensive growth stocks relatively unattractive.
Apple was down 2.6% and Microsoft was down 2%. Nvidia is down 4.7% and in January it was down more than 24%. The tech sector is by far the largest on the S & P 500, down more than 12% so far this year.
The sale has expanded to cryptocurrencies. Bitcoin fell to $ 33,000 overnight, but recovered above $ 36,000 early in the afternoon. Still, digital currencies are well below the November hit of over $ 68,000.
The market is waiting for contact from Federal Reserve policy makers after their latest meeting ends Wednesday. Some economists have expressed concern that the Fed is already moving too late to combat high inflation.
Other economists have said they are concerned that the Fed may act too aggressively. They argue that a number of rate hikes run the risk of causing a recession and do not delay inflation in any case. In this view, highs primarily reflect the groaning supply chain that the Fed’s rate hikes are incapable of healing.
When the Fed raises short-term interest rates, borrowing tends to be higher for consumers and businesses, slowing the economy to curb inflation. This can reduce corporate profits, which tend to influence stock prices in the long run.
The Fed’s benchmark short-term interest rates are currently in the range of 0% to 0.25%. Investors expect the Fed to quadruple interest rates by the end of the year, up nearly 65% from 35% a month ago, according to CME Group’s FedWatch tool.
Wall Street expects its first rise in interest rates in March. Goldman Sachs is forecasting four rate hikes this year in a weekend note to customers, but the Fed will raise rates more than five times if supply chain problems and wage growth keep inflation at high levels. He said he could be forced to do so.
Investors are also keeping an eye on what is happening in Ukraine. Tensions increased between Russia and the West on Monday over concerns that Moscow was planning an invasion of Ukraine, and NATO outlined potential military and ship deployments.
The STOXX 600 index in Europe fell 3.6% due to concerns over the Fed’s tightening and the situation around Ukraine. The Russian ruble says US President Joe Biden could block Russian banks from accessing the dollar or impose other sanctions in the event of a Russian invasion. It fell even after showing.
Bond yields are kept low. Yields on 10-year government bonds fell from 1.74% late Friday to 1.72%. The decline in yields weighed heavily on banks. Banks rely on higher yields to charge interest on more favorable loans. Bank of America fell 3%.
Investors monitor the latest rounds of a company’s earnings to assess how the company is dealing with higher prices and what it plans to do when inflation continues to put pressure on the business. I am.
On Tuesday, American Express, Johnson & Johnson, and Microsoft will report the results. Boeing and Tesla will report their results on Wednesday. McDonald’s, Southwest Airlines and Apple will report results on Thursday.
Stocks plummet as market eyes are supplied and Ukrainian tensions rise | Chicago News
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