The Dow fell about 650 points, or 1.9 percent, in the early afternoon as the April sell-off sparked by fears of economic slowdown continued after a brief recovery on Monday. The losses are driven by mega-capital technology stocks, as investors expect key reports on corporate profits this week. The results for the first quarter from Microsoft (MSFT) and the parent company of Google Alphabet (GOOGL) will be released after today’s closing bell.
The tech Nasdaq fell about 3.2 percent, retreating further into the bear market, and the S&P fell 2.1 percent.
After Federal Reserve Chairman Jerome Powell said last Friday that there were likely to be aggressive interest rate increases next month, the Dow fell about 980 points, or 2.8 percent. Rising interest rates are aimed at curbing impassable inflation, but investors are more worried that rising interest rates will slow consumer spending and the housing market, leading to the next recession.
Rapidly growing technology stocks are closely linked to Federal Reserve decisions. These interest rate sensitive companies have high price / earnings ratios because they are usually measured by future profits and do not pay dividends. Higher rates mean that future profits will cost less than today’s.
Cyclical stocks also fell on Tuesday. The Dow 3M component fell nearly 3%, as did UPS shares, although both companies exceeded earnings expectations.
General Electric fell more than 11% after warning that its 2022 outlook is a “downward trend”.
Asian markets also retreated on Tuesday as China’s economic downturns sparked by the country’s zero-Covid policy disrupted global supply chains. China is a major customer in the US technology and semiconductor markets.
Investors also remain worried about the geopolitical turmoil surrounding Russia’s invasion of Ukraine. A senior Russian official said on Tuesday that the threat of nuclear war was real.
The CNN Business Fear & Greed Index, which measures seven market sentiment indicators, fell deeper into fear on Tuesday.
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