The 29th (local time) is expected to be recorded as another ‘Black Friday’ in the New York Stock Exchange. The Nasdaq fell more than 4% as tech stocks led the plunge. The major indices also hit their year-round lows.
The leading index, the S&P 500, closed at 4,131.93, down 3.63% from the previous day, the Nasdaq Composite, down 4.17%, at 12,334.64, and the Dow, down 2.77%, at 32,977.21, respectively. As of April, the Nasdaq Composite fell about 14%, the biggest decline since October 2008.
The plunge was triggered by Amazon, the third-largest company by market capitalization. After showing a ‘first-quarter earnings shock’ that fell short of market expectations, the stock price of Amazon plummeted more than 14% on the same day.
Shares of Amazon, the third-largest company in the New York Stock Exchange by market cap, fell more than 14% on the 29th (local time). It was the largest decline since 2011.
Amazon reported its first quarterly loss since 2015. With the exception of the cloud business, the rest were largely sluggish. In particular, as the stock price of Rivian, which holds an 18% stake, plummeted, it suffered an equity-method loss of $7.6 billion.
Apple, the No. 1 company by market cap, posted relatively good first quarter results, but the outlook for the second quarter was bleak. It predicted that the supply chain would lose between $4 billion and $8 billion in sales in the second quarter alone.
The logo of Amazon, the largest e-commerce company in the United States. Reuters Yonhap News
The upcoming Federal Open Market Committee (FOMC) meeting of the US central bank next week also put a heavy burden on tech stocks. The market has made it a fact that the interest rate will be raised by 50 basis points (0.5 percentage points) at this regular meeting.
Also of interest is the timing and size of the balance sheet shrinkage. There are many concerns that market liquidity will be significantly reduced if the Fed officially enters into quantitative tightening.
Shares of major companies in the New York Stock Exchange plunged on the 29th (local time). Amazon’s earnings shock triggered the sell-off. Provided by Pinbiz
It will be interesting to see what Chairman Jerome Powell will make at the press conference to be held shortly after the release of the FOMC statement. The market is predicting that Chairman Powell is not likely to make a stronger remark than in the past. Because his prices are so high.
The U.S. Department of Commerce’s core personal consumption expenditure (PCE) price for March fueled these concerns.
PCE core prices (excluding changes in energy and food and beverage prices) were up 5.2% from a year ago. It far exceeded the Fed’s management target (2.0%). However, it was a little comforting that it fell short of the market expectation (5.3%) as well as the previous record (5.3%).
Core inflation in the United States based on personal consumption expenditure (PCE) soared 5.2% last month (compared to the same period a year earlier). It is the highest since the early 1980s. Provided by the U.S. Department of Commerce
Treasury yields rose sharply as the prospect of the Fed taking a ‘big step’ (a rate hike of 0.5 percentage points or more) strengthened.
The 10-year U.S. Treasury yield closed at 2.89%, up 4bp from the previous day, and the 2-year yield at 2.70%, up 7bps.
Harvard University professor Kenneth Rogoff said, “The biggest uncertainty in the market is the Fed tightening cycle. Raising interest rates too high will lead to recessions, and raising rates too low will make it difficult to keep up with inflation. “There is a 50% chance that the U.S. economy will go into recession next year,” Rogoff said.
In Europe, concerns about stagflation (inflation rising amid a recession) have been raised again. The eurozone (19 countries using the euro) grew only 0.2% in the first quarter. Meanwhile, the Eurozone’s consumer price index (preliminary) in April reached an all-time high of 7.5%.
Europe’s consumer price index (preliminary) in April was calculated to have jumped 7.5% compared to the same period last year. Provided by the European Statistical Office and Trading Economics
International oil prices were slightly weaker.
On the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) for June contract fell 0.6% from the previous day to $104.69 a barrel, and the price of Brent in Europe fell 0.1% to $107.14 a barrel.
Today’s ‘Global Market Now’ issues are as follows.
① Why did Amazon trigger the stock market sell-off? ② Musk, Is Tesla Selling Really Over? ③ Oil companies predicting production disruptions in the second quarter ④ “The probability of a US recession next year is 50%” ⑤ Interest rates hikes in the US, UK and Australia next week, etc.
More details can be found on Hankyung Global Market YouTube and Hankyung.com broadcasts.
New York = Correspondent Jo Jae-gil road@hankyung.com
