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May 29, 2022

News of the Trade

Latest trading, investing, and financial news

Dow tumbles nearly 500 points, S&P 500 slides to 13-month low amid sea of losses in stocks

U.S. stocks remained sharply lower Monday afternoon, building on technical weakness following last week’s volatile price action, as investors fretted over stagflation threats after the Federal Reserve tightened policy to rein in surging price pressures.

What’s happening
  • The Dow Jones Industrial Average
    DJIA
    fell 495 points, or 1.5%, to 32,401 after falling by more than 650 points earlier in the day.

  • The S&P 500
    SPX
    lost 110 points or 2.7%, to trade at 4,012 and hit its lowest intraday level since early April 2021, according to FactSet.

  • The Nasdaq Composite
    COMP
    slumped 466 points, or 3.9%, to 11,671 and slumped to its lowest intraday level since November 2020.

Bitcoin
BTCUSD
continued to drop below the $35,000 level, more than 50% lower from its record high set in November.

What’s driving markets

Stocks continued to slump on Monday following the longest losing streak in years for all three major indexes last week. The Dow and S&P 500 each slipped 0.2% last week, while the technology-heavy Nasdaq fell 1.5%. It was the longest string of weekly losses for the Dow since May 2019, for the S&P 500 since June 2011, and for the Nasdaq since November 2012.

Investors are assessing the risks of continued high inflation against the prospects of weakening growth, combined with the need of policy makers to continue lifting interest rates. While Fed Chairman Jerome Powell said the central bank was not actively considering a 75-basis-point rate hike, that isn’t likely to keep some corners of the market from pricing that in.

Read: Will Fed go too far? Dow’s violent swings put investors on lookout for recession signals

“The world remains a scary place for investors this year,” said Alejo Czerwonko of UBS Global Wealth Management. “We have been dealt with one negative shock after another, all taking a heavy toll on the global economic outlook.”

“The American Association of Individual Investors surveys its members weekly with a simple question: “What direction do you feel the stock market will take in the next six months?” Just 19% of respondents were bullish over the last month, the lowest four-week average in three decades,” Czerwonko wrote in a note Monday.

Even analysts within BlackRock Inc., the world’s biggest asset manager, are slightly reducing their risk profile amid a worsening macroeconomic outlook. They now see little chance of a “perfect economic scenario.”

Stock-market sentiment could be summed up in a single word, according to Daniel Tenengauzer, head of markets strategy and insights for BNY Mellon: “Bad,” he said via phone. Financial markets are in an even worse mood than they were in the 2008 global financial crisis, based on BNY’s own model, he says.

Earlier in the day, the 10-year Treasury yield
BX:TMUBMUSD10Y
briefly moved above 3.2%, before pulling back, while real or inflation-adjusted yields rose to their highest or least negative levels in more than two years.

A surge in yields is a negative for stocks, particularly tech and other growth shares because their valuations are based on profit and cash flow far into the future. Rising yield on risk-free Treasurys cuts the present value of those future flows.

Analysts said weak Chinese trade data contributed to pressure risky assets. Government customs data showed exports rose only 3.7% year-over-year in April, down sharply from growth of 15.7% in March, news reports said. Imports edged up just 0.7%, reflecting tepid demand.

The release of the April jobs report on Friday also did little to move the dial ahead of this Wednesday’s release of the consumer-price index, according to Peter Iosif, senior research analyst at Noteris.

Need to Know: ‘Drive down the middle of the road.’ How this fund manager advises investors navigate a tough investing climate right now.

Companies in focus
  • Shares of Uber Technologies Inc.
    UBER
    fell 9.8% after CNBC reported that the ride-sharing and food-delivery company is planning to cut spending on marketing and incentives and slow hiring, citing an email sent by CEO Dara Khosrowshahi to staff on Sunday.

  • Palantir Technologies Inc.
    PLTR
    shares dropped 22% after the software company delivered a mixed earnings report and downbeat forecast.

  • BioNTech SE
    BNTX,
    the U.S.-listed biotech company, said its first-quarter profit more than tripled to €3.7 billion ($3.9 billion), or €14.24 per share, from €1.13 billion, or €4.39 per share, as revenue jumped to €6.38 billion from €2.05 billion, mostly on its share of COVID-19 vaccine sales from Pfizer and Fosun Pharma as well as direct sales to customers in Germany and Turkey. BioNTech’s American depositary receipts rose 2.8%.

What other assets are doing
  • The ICE U.S. Dollar Index
    DXY,
    a measure of the currency against a basket of six major rivals, was up by less than 0.1% after trading near a 20-year high.

  • Oil futures pulled back, with the front-month crude contract
    CL
    down 6.2% to below $104 a barrel. Gold
    GC00
    finished 1.3% lower, setting at $1,856.60 an ounce.

  • The Stoxx Europe 600
    XX:SXXP
    closed down by 2.9%, while London’s FTSE 100
    UK:UKX
    dropped 2.3%.

  • The Shanghai Composite
    CN:SHCOMP
    finished 0.1% higher, while Japan’s Nikkei 225
    JP:NIK
    tumbled 2.5%.

— Mike Murphy contributed to this article.