Wall Street ended sharply lower on Monday, pulled down by a large-cap growth stock sell-off. Investors remained apprehensive about the extent to which the Fed would have to hike interest rates to tackle inflation. There were supply-chain concerns arising from the COVID situation in China. All three major indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 2% or 653.67 points to close at 32,245.7. Twenty-two components of the 30-stock index ended in the red, one remained unchanged, while seven ended in the green.
The tech-heavy Nasdaq Composite fell 4.3% or 521.41 points to close at 11,623.25 as the tech stocks declined.
The S&P 500 dipped 3.2% or 132.1 points to end at 3,991.24. All the 11 broad sectors of the benchmark index closed in the red.
The Energy Select Sector SPDR (XLE), the Real Estate Select Sector SPDR (XLRE) and the Consumer Discretionary Select Sector SPDR (XLY) lost 8.3%, 4.7% and 4.3%, respectively.
The fear-gauge CBOE Volatility Index (VIX) increased 15.1% to 34.75. A total of 15.3 billion shares were traded on Monday, higher than the last 20-session average of 12.3 billion. Decliners outnumbered advancers on the NYSE by a 7.18-to-1 ratio. On the Nasdaq, a 5.44-to-1 ratio favored declining issues.
Recession Fear Drives Wall Street Meltdown
On Monday, the way stocks moved in the market was a direct reaction to the Fed’s plans to increase interest rates to rein in inflation. Investors remain unconvinced that the 50 basis point hike announced last Wednesday would sufficiently deal with the situation and expect further rate hikes. There have been concerns about a 75 basis point hike in the June meeting. These measures can slow down the economy and usher in a recession. The S&P 500 ended below 4000 for the first time in over a year, and Nasdaq closed at its lowest since November 2020.
Mega-cap growth stocks were the day’s biggest losers as investors considered them riskier in the light of interest rate hikes. Growth stocks, especially in the tech sector, rely heavily on future cash flows.
This saw stocks like NVIDIA Corporation
NVDA
and Tesla, Inc.
TSLA
fall sharply to end the day lower by 9.2% and 9.1%, respectively. NVIDIA carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
The COVID Situation In China Keeps Investors Worried
Strict COVID restrictions in Beijing, Shanghai and other major cities across China have majorly impacted international trade in recent days. Many mega-cap tech companies have manufacturing units in China. With local governments extending COVID restrictions on its citizens as well as businesses, supply-chain concerns have clouded Wall Street, keeping investor mood downbeat.
Oil prices went down, raising concerns about energy demand, as China is one of the top oil importers in the world. U.S. crude fell 6.45% to $102.69/barrel and Brent was at $105.43, down 6.19%.
Economic Data
The U.S. Census Bureau reported that Total Wholesale Inventories, after adjustment for seasonal variations and trading day differences, but not for price changes, were $840.3 billion at the end of
March, up 2.3% from the revised February level. This is keeping in with the consensus for the period.
February’s increase was revised to 2.8% from the previously reported 2.5%.
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