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The Dow fell more than 900 points on Friday as Wall Street ended a gloomy April marked by applause from investors over rising interest rates, relentless inflation, corporate profits and global unrest.
The Dow Jones industrial average lost 939 points, or 2.8%, down 5.3% after closing on March 31. The S&P 500 fell 3.6% and 9.1% for the month, respectively, and the Nasdaq, home of technology stocks that took over the weight of sales, fell 4.2% and 13.5% for the month.
It was the worst month for the S&P 500 since March 2020, and its 13.8 percent loss since January 3 marked the worst start to the year since World War II, according to Sam Stoval, chief investment strategist at CFRA Research.
Investors are usually dizzy when the calendar turns to April; the month is known for hot markets and consumer spending. And a bad April has the potential to scare economists and traders into the outlook for the rest of the year.
There are many macroeconomic signs that could be worse. Technology companies were hit hard, with shares of Amazon, Apple and Google, the parent of Alphabet, down 10 percent to 25 percent in April.
Amazon, whose founder Jeff Bezos owns The Washington Post, lost 14 percent of its share price, $ 406 a share, on Friday alone.
The Federal Reserve appears ready to raise interest rates on loans to between 3 and 3.25 percent, according to contracts tied to its interest rate-fixing body, in order to prevent greater inflationary pressures.
Inflation jumped to 8.5% in March, but the narrower core index of personal consumption spending, which excludes more volatile food and energy spending, showed signs of slowing.
Internationally, Russia cut off fossil fuel exports to Poland and Bulgaria on Thursday, raising energy prices. Brent crude traded at $ 109 a barrel on Friday, and RBOB gas, the benchmark for U.S. gasoline, sold for $ 3.46 a gallon.
Chinese health authorities have also imposed an almost complete blockade in Beijing and Shanghai, the country’s two largest cities, to fight the growing number of COVID-19 cases, disrupting already stressed supply chains.
Overall, the economy shrank by 1.4% in the first three months of 2022, fueling fears of a recession defined as two consecutive quarters of economic downturn.
“Markets are finally facing economic and geopolitical realities: it’s not all right,” said George Ball, chairman of Houston-based financial services company Sanders Maurice Harris.
“Markets are worried that the Federal Reserve is raising interest rates until it slows down, making a big, unforced mistake in policy,” said Jamie Cox, managing partner at Harris Financial Group. “In other words, world events are slowing economic growth, especially in Europe and Asia, with no clear signs of weakening. As yesterday’s negative imprint of GDP shows, the consequences are here at home. So instead of simply reassessing the value of cash flows with the expected rate of interest rates, markets are considering a recession. “
But economists welcomed other signs, even as investors sought safe haven. Corporate profits are largely positive. Meta, the parent company of Facebook and Instagram, has reported user growth after alarms in previous quarters that it is losing younger users to the newly created video-sharing platform TikTok.
Shares of Twitter rose 25.7 percent after tycoon Elon Musk secured funding to buy the company. However, its electric car maker Tesla lost 20 percent, forcing it to sell an additional $ 8.4 billion in shares to provide liquidity for its $ 44 billion acquisition on Twitter.
Service and natural resource companies excelled in April. Proctor & Gamble earned nearly $ 8 a share, or 5.2 percent. Health insurance giant Humana grabbed more than $ 9 a share, or 2 percent. Tyson Foods, an Arkansas-based poultry producer, and Marathon Petroleum added 4% and 2.4%, respectively.
“Production and service performance look good,” said Luis Navelier, who heads an investment firm in Reno, Nev. “Consumer spending remains healthy. The only embarrassment is all the things we import from China because of the blockade in Shanghai.
On the consumer side, personal income rose 0.5 percent in March, according to federal data, fueling a larger-than-expected boost in consumer spending. Walmart was the beneficiary, with its shares rising just more than 3 percent in April.
The Fed’s forthcoming interest rate hikes, while worrying for larger investors, have led economists to be optimistic that labor costs and inflation may soon catch up.
“Consumers are the backbone of the economy and spending continues at a normal pace, despite everything the world has thrown at them in the first quarter of this year from the war in Europe to the stock market crash,” said Chris Rupki, chief economist at market research firm FWD Bonds. said in a note on Friday. “There is nothing wrong with the economy, as consumers are still supporting the way forward to prosperity. There is still no recession on the horizon.”
Then came Friday’s sale. Rupki reconsidered his assessment in a note after closing.
“The stock market has collapsed, the leading indicators show that the economy will collapse,” he said. “Look down.”
Kate Rabinowitz and Doug McMillan contributed to this report.
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