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Investors are decidedly shunning risky assets and putting funds into growth stocks ahead of the proposed market stabilization era.
The United States stock market has plunged further by a mile as inflation fears and general economic uncertainty grip the market, with the Dow Jones Futures and other indices future recording gains across the board. The Dow Jones Industrial Average (INDEXDJX: .DJI) Futures climbed 150 points on Monday morning atop a 0.44% gain.
Futures on the S&P 500 Index (INDEXSP: .INX) also shot up by 0.48% and Nasdaq 100 futures rose 0.53%. The stock market has been in a freefall for the better part of the year. The S&P 500 is currently down 1.89% from Friday’s session, hitting 4,397.94, notably closing below its 200-Day Moving Average, an occurrence that has not been experienced since June 2020. The S&P 500 is down 5.7% for the past week.
The Dow Jones Industrial Average also recorded a bearish slump of 1.30% to 34,265.37 on the last trading session of last week and is effectively down 4.6% for the week, the worst performance for the 30-stock index since October 2020. The Nasdaq Composite (INDEXNASDAQ: .IXIC) is arguably the worst performer for the last week as it dropped 7.6% for the past week, and about 14% below the record high set back in November 2021.
The anticipation of an interest rate hike has now been mixed by dwindling corporate earnings figures across Wall Street.
“What had initially been a stimulus withdrawal-driven decline morphed last week to include earnings jitters,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “So investors are now worried not just about the multiple placed on earnings, but the EPS forecasts themselves.”
The earnings figures have been mixed with top companies including Goldman Sachs Group Inc (NYSE: GS) and Netflix Inc (NASDAQ: NFLX) posting disappointing figures last week. With the earnings season underway, investors are now focusing on the scheduled performance reports from industry giants including Microsoft Corporation (NASDAQ: MSFT), Tesla Inc (NASDAQ: TSLA), and Apple Inc (NASDAQ: AAPL).
Dow Jones Futures Growth and Economic Inflation Response
The growth on the Dow Jones Futures comes amid a staggering inflation rate that the Federal Open Market Committee (FOMC) is billed to respond to with at least a 4-quarter interest rate increase. While there has been much anticipation on the committee to give a hint as to the date it will start hiking the interest rate as early as Wednesday this week, Goldman Sachs analyst, David Mericle believes the FOMC will continually update its interest rate until it sees a promising recovery in the market.
In the meantime, investors are decidedly shunning risky assets and putting funds into growth stocks ahead of the proposed market stabilization era.
“The big story so far in 2022 has been the rapid move higher in interest rates, which is prompting investors to re-assess valuations for some of the most expensive segments of the market and rotate into value stocks,” said David Lefkowitz, head of equities Americas at UBS Global Wealth Management.