The U.S. stock market fell sharply at the close of the week, posting its biggest drop since October 2020.
Investors were very active in assessing the hawkish comments of Federal Reserve Chairman Jerome Powell, as well as the next corporate earnings data, which mostly disappointed market participants.
northern market always attracts bears
The Dow Jones lost about 1,000 points, collapsing 2.82%. The S&P500 and Nasdaq broad market index lost 2.77% and 2.55%, respectively. Importantly, the drop in the high-tech Nasdaq 100 has already resulted in a loss of more than 9% in April, which becomes the worst since 2008.
The Dow Jones has lost nearly 1,000 points. The bears took a bit of a walk. Photo: Yandex Images
Caterpillar (CAT) -6.55% and Verizon (VZ) -5.63% led the declines. Tech giants are losing tens of billions of dollars in capitalization. Shares of Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) fell by 2.4-2.7%, Alphabet (GOOG) – 4.26%. Twitter (TWTR) shares continued to hold their own, gaining nearly +4% on the back of the struggle between Elon Musk and Vanguard for the company.
Despite the opinion of some economists that too aggressive monetary policy can lead to economic recession, the U.S. Federal Reserve made it clear that the aggressive tightening of the monetary policy will continue.
Futures Market Reaction
According to CME FedWatch, federal funds futures contracts are already pricing in a 94% chance of a 75 basis point rate hike this June. Although as recently as Thursday that value was at 70%, and a week ago it was 28% at all.
“Today’s market action reflects the power of Jerome Powell’s comments yesterday that the Fed is determined to nail down rising inflation and actually demonstrates that the market should expect a 50 basis point rate hike in May,” LPL Financial Chief Strategist Quincy Crosby commented.
The Fed will continue its mission
Addressing European Central Bank President Christine Lagarde and other officials Thursday, Powell said the Fed is committed to returning inflation to the 2 percent norm, Yahoo Finance writes
The hawkish attitude of the U.S. regulator and the relentless rise in Treasury bond yields could undermine the current appeal of the stock market, previously seen as the only viable option for many investors.
Investors were also shying away from risk ahead of the final round of French presidential elections on Sunday. The potential victory of far-right candidate Marine Le Pen over incumbent Elysee Palace master Francois Macron could cause additional volatility in global capital markets.
Trading in Europe
Participants on European trading floors joined the sell-off on Friday. Stock indices in Germany, France and Italy lost from 2% to 2.4%. The financial results of the European corporations were mixed, and the increasingly clear signals for a tighter monetary policy from the European Central Bank undermined the appetite for risk.
Corporate reports from mega-corporations, including Apple, Microsoft and Amazon, are likely to be crucial for the market’s direction in the coming week.