Shares fell sharply on Thursday, completely erasing the rally from the previous session in a stunning turnaround that brought investors one of the worst days of 2020.
The Dow Jones Industrial Average lost 1,063 points, or 3.12%, to close at 32,997.97. The tech Nasdaq Composite fell 4.99% to 12,317.69, its lowest closing level since November 2020. Both losses were the worst declines in a single day since 2020.
The S&P 500 fell 3.56% to 4,146.87, marking its second worst day of the year.
The move comes after a big rise in shares on Wednesday, when the Dow rose 932 points, or 2.81%, and the S&P 500 rose 2.99% for its biggest gains since 2020. Nasdaq Composite jumped 3.19 %.
All of those winnings were wiped out before noon in New York on Thursday.
“If you go up 3% and then give up half a percent the next day, that’s pretty normal … exceptional,” said Randy Frederick, managing director of trade and derivatives at the Schwab Center for Financial Research.
Major technology stocks were under pressure, with Meta Platforms on Facebook and Amazon falling nearly 6.8% and 7.6%, respectively. Microsoft fell about 4.4 percent. Salesforce fell 7.1%. Apple fell by nearly 5.6%.
E-commerce stocks were a major source of weakness on Thursday after some disappointing quarterly reports.
Etsy and eBay fell 16.8% and 11.7%, respectively, after issuing weaker-than-expected revenue guidelines. Shopify fell nearly 15% after missing top and bottom line scores.
The downturns brought the Nasdaq to its worst day in nearly two years.
The biggest Nasdaq decline since March 2020
Date decline March 16, 2020 – 12.32% March 12, 2020 – 9.43% March 9, 2020 – 7.29% June 11, 2020 – 5.27% May 5, 2022 – 4, 99%
The government securities market also marked a dramatic turnaround in Wednesday’s rally. 10-year government bond yields, which are moving back in price, rose above 3% on Thursday and reached their highest level since 2018. Rising interest rates could put pressure on growth-oriented technology stocks, as making distance profits less attractive to investors.
On Wednesday, the Fed raised its key interest rate by 50 basis points, as expected, and said it would start reducing its balance sheet in June. However, Fed Chairman Jerome Powell said at a news conference that the central bank was “not actively considering” a larger rate increase of 75 basis points, which appears to have sparked a rally.
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However, the Fed remains open to the prospect of taking interest rates above neutrals to curb inflation, said Zachary Hill, head of portfolio strategy at Horizon Investments.
“Despite the tightening we’ve seen in the financial situation over the last few months, it’s clear that the Fed would like to see them even more,” he said. “Higher equity estimates are incompatible with this desire, so unless supply chains strengthen quickly or workers invade the workforce, there is likely to be any increase in part-time capital as Fed reports become available again. more hawks. “
Growth-driven stocks also hit Thursday. Caterpillar fell nearly 3% and JPMorgan Chase 2.5%. Home Depot sank by more than 5%.
Carlyle Group co-founder David Rubenstein said investors need to get back to “reality” about headwinds for markets and the economy, including the war in Ukraine and high inflation.
“We are also looking at increases of 50 basis points in the next two FOMC meetings. So we’ll tighten up a bit. “I don’t think it’s going to tighten enough to slow the economy … but we still have to admit that we have some real economic challenges in the United States,” Rubenstein told CNBC’s Squawk Box on Thursday.
Thursday’s sell-off was wide, with more than 90 percent of the S&P 500’s shares down. Even better performers for the year lost ground, with Chevron, Coca-Cola and Duke Energy down less than 1%.
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