The Dow fell nearly 350 points, or 1.1%, in lunch trading. Blue chips have already fallen by almost 15% this year. The S&P 500, which is dangerously close to a 20% drop from its all-time high of January 3 and a bear market, fell 0.8%. The tech Nasdaq, which is already in the bear market, has fallen slightly. Nasdaq fell 27% this year alone. High technology stocks were among the biggest losers on the market on Thursday, after the Dow Cisco component announced sales that missed forecasts and also gave a weak outlook. Cisco (CSCO) fell 12% on the news. But shares of Kohl (KSS) rose nearly 4% on Thursday in volatile trading, although the struggling chain reported a huge loss of profits and cut its guidelines.
Poor performance by corporate leaders is also raising recession alarms. More experts are starting to predict a decline later this year or early 2023. Wall Street concerns are palpable.
“What is the catalyst? What will make investors want to buy more and give them confidence in the market? I don’t think there’s anything right now,” said JJ Kinahan, chief market strategist at tastytrade.
VIX, a measure of Wall Street volatility, has almost doubled this year. And the CNN Business Fear & Greed Index, which looks at the VIX and six other measures of market sentiment, is showing signs of Extreme Fear.
“Investors need to keep their seat belts fastened. This period of instability is unlikely to end,” said Tom Galvin, chief investment officer at City National Rochdale.
“There is a long list of uncertainties,” Galvin added, citing Federal Reserve policy and inflation, worries about new Covid outbreaks in China and Russia’s invasion of Ukraine as continuing concerns.
Galvin said investors would do well to avoid speculative technology stocks and European stocks amid concerns about overvaluations and a potential economic downturn. Instead, he recommends quality stocks with blue chips that pay stable dividends.
Investors may also be concerned about how market shocks are hurting large hedge funds and other institutional investment firms.
A well-known hedge fund, Melvin Capital, has announced plans to close after betting on rising stocks of memes like GameStop (GME) in 2021 and making untimely purchases of travel stocks this year. other cryptocurrencies and other investments that could benefit from economic recovery.
“There’s definitely more fear and nervousness,” said Dan Pippitone, CEO and co-founder of TradeZero. “The crypto crash is also having an impact. There is an approach to waiting and seeing. People are sitting on the sidelines waiting for a clear direction of where we are going.”
Instead, investors are now flocking to stocks that are perceived as better hedging against inflation and rising interest rates, and in some cases, beneficiaries. Oil stocks are big market winners this year. Chevron (CVX), up more than 40%, is Dow’s leading stock and one of Warren Buffett’s four largest holdings in Berkshire Hathaway (BRKB), beating the market steadily this year. Berkshire is also a major investor in Occidental Petroleum (OXY), which has doubled this year and is the best performer in the S&P 500.
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