This week saw the Nasdaq suffer its worst performance since the global pandemic began. On Wednesday, both cryptocurrency and biotech stocks tumbled on news that China was tightening controls over capital flow in these sectors. The S&P500 also suffered a steep decline during this period.
The “nasdaq futures” is a stock index that tracks the performance of NASDAQ stocks. On Monday, the index finished its worst week since the pandemic onset.
Investors are concerned about the likelihood of increasing interest rates and their impact on valuations, as all three main U.S. indices declined for the third week in a row, extending their fall into 2022.
The S&P 500 and Nasdaq Composite Index wrapped up their worst weeks since March 2020; the Nasdaq has fallen for four weeks in a row. The Dow Jones Industrial Average finished its worst weekly performance since October 2020.
To begin the year, investors have shifted their portfolios away from riskier assets. Higher interest rates have taken a toll on high-flying tech stocks and unprofitable company shares, sending the Nasdaq into correction zone. Meanwhile, oil prices and government bond rates have risen in 2022.
The Federal Reserve is widely expected to hike interest rates many times this year to battle inflation, which has knocked on equities. Rapid inflation, according to Fed Chairman Jerome Powell, is a “serious danger” to a full economic recovery. Consumer prices surged to a four-decade high in December, according to data. Despite the rises, interest rates will remain around record lows, giving investors faith that markets would recover.
“The Fed is saying, ‘OK, zero interest rates don’t make sense here, so we’re going to shift back toward something more normal,’” said Jonathan Golub, head of quantitative research at Credit Suisse and top U.S. stock strategist. “They’re not quite raises, but they’re a hint that a significant pace of change is on the way.”
For the fourth week in a row, the Nasdaq Composite Index has dropped.
Bloomberg News/Bloomberg News/Michael Nagle
Mr. Golub remains optimistic about equity markets, citing a year-end target of 5200 for the S&P 500, about 5.3% higher than Wall Street strategists’ average target.
All three major indexes fell Friday, ending a holiday shortened four-day trading week. The S&P 500 fell 84.79 points, or 1.9%, to 4397.94, while the Dow industrials lost 450 points, or 1.3%, to 34265.37. The Nasdaq was off 385.1 points, or 2.7%, to 13768.92.
For the week, Nasdaq fell 7.55%, while the S&P 500 dropped 5.7% and the Dow lost 4.6%.
Bitcoin fell 11 percent to $36,689.39 at 5 p.m. ET, its lowest level since July 25. Ether has lost 15% of its value.
“All risk premium assets are being impacted—crypto, high leverage, growth names—and what’s working right now is the polar opposite, quality equities,” said Jerry Braakman, chief investment officer and president of First American Trust. Investors should avoid buying tech companies on the drop, according to him.
Higher rates will normalize the valuations of certain tech firms, according to Aoifinn Devitt, chief investment officer at Moneta, and make economically sensitive areas of the market, such as utilities and real estate, more appealing. “By no means are we approaching a yield that makes stock markets seem unappealing,” Ms. Devitt said.
Within the S&P 500, only the consumer staples sector closed in the green, rising less than 0.1%. Clorox Co. added $2.60, or 1.5%, to $178.60, Colgate-Palmolive Co. gained $0.83, or 1%, to $83.67 and Procter & Gamble Co. advanced $0.62, or 0.4%, to $162.62.
Stocks for stay-at-home moms and dads have been under fire recently. Netflix’s stock dropped $110.75, or 22%, to $397.50 after the firm said that membership growth will stall. Peloton gained $2.84, or 12%, to $27.06, recouping some of its losses after the stock fell almost 24%. The connected-fitness company’s manufacturing was reportedly halted on Thursday, according to reports. The accusations were rebuffed by the company’s CEO.
According to Ms. Devitt, firms like Netflix and Peloton will struggle to achieve the same level of growth in 2022 as they did when the epidemic first began. Stay-at-home stocks would need to keep innovating if they want to go higher, she noted.
President Biden stated on Wednesday that if Russian President Vladimir Putin takes action against Ukraine, the US is prepared to retaliate with sanctions. Biden also sketched out a diplomatic option. Susan Walsh/Associated Press photo
Inflation-linked bond rates, which serve as a benchmark for borrowing costs, have risen as investors anticipate on higher rate hikes. The benchmark 10-year Treasury note yield dropped to 1.747 percent on Friday, the biggest one-day drop since December 3. Tensions between Russia and NATO, according to investors, are also dragging on market mood.
“Geopolitical risk, [central bank] policy repricing, and the inflation mix in terms of cost pressures all play a role.” When you combine all of those factors, you get a significant shift,” said Georgina Taylor, a multiasset fund manager at Invesco. “The risk premium for stocks needs to rise.”
Oil prices fell further on Friday. According to experts at RBC Capital Markets, global benchmark Brent oil slid 0.55 percent to $87.89 a barrel, the worst drop in over two weeks, driven down by an unexpected surge in US crude stocks.
Siemens Gamesa Renewable Energy, a wind-power firm based in the United States, reported an operational loss and decreased its outlook, citing supply-chain difficulties. Some Chinese drugmakers’ stocks soared when they were chosen to assist in the development of lower-cost versions of Merck’s Covid-19 tablet. BrightGene Bio-Medical Technology increased by 20%, while Viva Biotech increased by 14%.
Stocks in Asia-Pacific and Europe fell sharply on Friday. The Stoxx Europe 600 index sank 1.8 percent, while the Shanghai Composite Index and the Nikkei 225 in Japan both lost 0.9 percent.
—This article was co-written by Dave Sebastian.
Hardika Singh and Anna Hirtenstein can be reached at [email protected] and [email protected], respectively.
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The “u.s. stock market” is a term that refers to the U.S. stock market, which includes NASDAQ and S&P 500. The u.s. stock market finished the worst week since the onset of pandemic on Friday, October 26th, 2018 with a decline of 2%.
Frequently Asked Questions
What is the difference between Nasdaq and S?
A: Nasdaq is a stock market index with the stocks of 100 companies. The S refers to Standard and Poors 500, which includes all U.S.-listed common stocks traded on the NYSE or NASDAQ exchanges that have an average market value of at least $4 billion.
How do you abbreviate Nasdaq?
A: Nasdaq is an abbreviation for the New York Stock Exchange.
What Nasdaq means?
A: The NASDAQ is a stock market located in the United States. It was created by the National Association of Securities Dealers Automated Quotation System (NASD).
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