By
Steve Muchoki
April 16th, 2024
All three major US stock indices witnessed heavy selling in April 2022 amid concerns about the Fed’s hawkish move in monetary policy tightening.
After a brutal end to the month of April 2022 last Friday, the US stock futures have been trading higher during early morning trading on Monday. As of press time, the Dow Jones Industrial Average is up 0.65% or 224 points suggesting a healthy start to May.
Similarly, the S&P 500 futures are up 0.73% or 30 points. While the NASDAQ Composite futures are up 0.87% of 111 points. All of these top three indices tanked heavily last Friday thereby accelerating April’s losses. The Dow Jones tanked over 2.5% or 900 points registering its fifth-straight week of losses.
Last Friday, the S&P 500 declined 3.63% registering its worst single-day fall in nearly two years. Both, the Dow Jones and the S&P 500 registered their worst monthly performance after the pandemic-driven market crash in March 2022.
In April 2022, Dow Jones ended 4.9% lower while the S&P 500 ended 8.8% lower. Quincy Krosby, chief equity strategist for LPL Financial said: “This has become a classic trader’s market as spikes in volatility and increasingly bearish headlines reverberate”.
Nasdaq Faces Bloodbath as Tech Disappoints
While the Dow Jones and S&P 500 ended considerably lower, the bloodbath in Nasaq Composite was even more severe. The Nasdaq Composite recorded its worst months since 2008 financial crisis. A number of factors like rapidly soaring inflation and surge in interest rates contributed to the fall.
Furthermore, the underwhelming earnings from the top tech companies exacerbated the fall. Nasdaq Composite recorded a 13.26% fall during the month of April 2022. Speaking to CNBC, Krosby said:
″[D]isappointing guidance from technology giants Amazon and Apple have exacerbated concern that a decidedly more hawkish Fed, coupled with still intractable supply chain issues, and rising energy prices may make the hope of a ‘soft landing’ from the Fed more elusive”.
Over. the last month, Netflix has corrected by a staggering 50%. At the same time, even blue-chips like Amazon and Meta Platforms (NASDAQ: FB) have corrected 24% and 10% respectively. Amazon.com Inc (NASDAQ: AMZN) reported a staggering $3.2 billion loss during the first quarter of 2022.
Tech stocks have been facing a severe sell-off amid very high valuations. Furthermore, future growth looks less-attractive owing to tighter monetary policies and interest rate hikes.
FOMC Meeting Announcement
Ahead this week, the Federal Open Market Committee will issue a fresh commentary on monetary policy. Thus, investors at Wall Street shall be watching the development very closely. Charlie Ripley, senior investment strategist for Allianz Investment Management said:
“Rising cost pressures and uncertain outlooks from the largest technology names have investors agitated…and investors are not likely to be comfortable any time soon with the Fed widely expected to deliver a 50 basis point hike along with a hawkish message next week”.
Furthermore, later this week on Friday, the US Labor Department shall be unveiling the jobs report.