| symbol | Price | change | %Change |
|---|---|---|---|
| Me: DJI | $29,202.88 | -93.91 | -0.32 |
| SP500 | $3,612.39 | -27.27 | -0.75 |
| I: COMP | $10,542.10 | -,110.30 | -1.04 |
US stocks tumbled early Tuesday morning as investors raised concerns about the Federal Reserve tightening interest rates and tightening borrowing.
Stocks fell on Monday, continuing a period of volatility as concerns over US Federal Reserve tightening, the escalation in the Ukraine war and China’s trade policy rattled markets.
The S&P 500 fell after opening with slight gains, shedding 27.27 points, or 0.7%, to close at 3612.39. The Dow Jones Industrial Average fell 93.91 points, or 0.3%, to 29202.88, while the Nasdaq Composite fell 110.30 points, or 1%, to 10542.10. That’s the lowest closing reading for the tech-heavy Nasdaq since July 2020, according to Dow Jones Market Data.
Chipmaker shares suffered losses amid the Biden administration’s new restrictions on semiconductor exports aimed at crippling China’s military.
The PHLX semiconductor sector fell 3.5% on Monday to its lowest closing level since November 2020. Those losses also helped drag down shares in companies that are big chip users.
“The new restrictions on semiconductor sales to China are a big reason we’re seeing the downside in these stocks,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.
Technology stocks make up about a quarter of the S&P 500, noted Mr. Frederick. Chipmaker Qualcomm was down $6.31, or 5.2%, to $114.60 on Monday, while Broadcom was down $22.78, or 5%, to $437.70. Technology was the worst performer of the 11 sectors in the S&P 500, down 1.6%.
Changing expectations of further rate hikes by the Fed have been the main reason for the recent swings in equities.
Friday’s jobs report showed that the job market is still tight as the unemployment rate has fallen to a half-century low, fueling fears that the Fed could tighten funding conditions more aggressively.
Hopes of a “Fed pivot” – during which the central bank would pause rate hikes and push equities higher – were largely dashed.
Traders now expect the federal funds benchmark rate to hit 4.7% by the second quarter of 2023, according to FactSet derivatives data, more aggressively than the Fed’s own forecasts.
“Inflation is still high and the job market is scorching hot — there’s no indication the Fed will be dovish or dovish for at least a few months,” said Michael Antonelli, market strategist at Baird. Investors are looking ahead to the next US inflation data release on Thursday as another key indicator of where monetary policy might be headed.
“There’s still this hangover in the markets. The US job market is still incredibly strong and the Fed has a single mandate right now: inflation,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “The most important number in the world right now” is the upcoming inflation number, he said.
Meanwhile, Asian equities were mostly lower on Tuesday as losses in technology-related stocks weighed on global benchmarks.
Taiwan fell 4.4% after reopening from a holiday in the first trading session since the US imposed new restrictions on exports of semiconductors and chip-making equipment to China. TMSC, the world’s largest chipmaker, plunged 8.3%.
Japan’s Nikkei 225 fell 2.6% to 26,401.25. South Korea’s Kospi slipped 1.8% to 2,192.07. Both markets reopened on Monday after the bank holidays. Hong Kong’s Hang Seng fell 2.2% to 16,830.73. The Shanghai Composite was up 0.2% to 2,979.79, while Australia’s S&P/ASX 200 was down 0.3% to 6,645.00.
“The Japanese and South Korean markets are catching up on earlier global market losses, with their exposure to the technology sector spurring a larger scale sell-off, reflected on Wall Street,” Yeap Jun Rong, a market strategist at IG in Singapore, said in a report.
In encouraging news, Japan reopened to generally unrestricted tourism on Tuesday after more than two years of COVID-19 restrictions. The pent-up travel spending could help boost the world’s third-largest economy as it struggles with slowing global growth and inflation.
