U.S. stocks fell sharply in early trade Monday, building on technical weakness following last week’s volatile price action as investors fretted over the threat of stagflation as the Federal Reserve tightens policy in a bid to rein in surging price pressures.
What’s happening
- The Dow Jones Industrial Average DJIA, -0.88% fell 478 points, or 1.4%, to 32,423.
- The S&P 500 SPX, -1.49% lost 76 points, or 1.8%, to trade at 4,047.
- The Nasdaq Composite COMP, -2.11% slumped 243 points, or 2%, to 11,900.
The Dow and S&P 500 each slipped 0.2% last week, while the technology-heavy Nasdaq fell 1.5%. The weekly declines came after wild swings for major indexes, surging on Wednesday and falling sharply on Thursday.
Cryptocurrencies fell over the weekend as well, with bitcoin BTCUSD, -4.51% dropping below the $35,000 level, down nearly half from its record high set in November.
What’s driving markets
Stocks slumped to end the week after Fed Chairman Jerome Powell said the central bank was not considering a 75-basis-point rate hike, leading some to question whether the Fed is doing enough to control inflation. The Dow tumbled more than 1,000 points Thursday, marking its worst day in five years, a day after jumping 900 points for its best day since 2020.
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“Circumstances have locked the Federal Reserve and U.S. inflation in a race to see who can be the most hawkish, but the Fed always seems to be in catch-up mode,” Stephen Innes, managing partner at SPI Asset Management said in a note Sunday night.
“Questioning the ability of central banks to lean against inflation effectively remains a significant source of angst as investors weigh greater near-term policy certainty versus medium-term inflation uncertainty,” he said. “The longer this goes on, it will drive even higher investor anxiety levels and pressure stocks lower.”
A surge in yields is a negative for stocks, particularly tech and other growth shares whose valuations are based on profit and cash flow far into the future. Rising yield on risk-free Treasurys cuts the present value of those future flows.
Analysts said weak Chinese trade data contributed to pressure across risky assets. Government customs data showed exports rose 3.7% year over year in April, down sharply from growth of 15.7% in March, news reports said. Imports edged up just 0.7%, reflecting tepid demand.
The release of the April jobs report on Friday did little to move the dial ahead of Wednesday’s release of the consumer price index.
“Overall, the release of the U.S. employment report for April failed to excite traders as despite the nonfarm payrolls figure remaining relatively at the same levels as in March and not dropping as the market expected, the unemployment rate failed to tick down and remained unchanged,” said Peter Iosif, senior research analyst at Noteris.
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Companies in focus
- Shares of Uber Technologies Inc. UBER, -3.01% fell 1.4% after CNBC reported that the ride-sharing and food-delivery company is planning to cut spending on marketing and incentives and slow hiring, citing an email sent by CEO Dara Khosrowshahi to staff on Sunday.
- Palantir Technologies Inc. PLTR, -20.56% shares dropped 21.1% after the software company fell short of expectations with its latest earnings and outlook.
- BioNTech SE BNTX, +3.26%, the U.S.-listed biotech company, said its first-quarter profit more than tripled to €3.7 billion ($3.9 billion), or €14.24 per share, from €1.13 billion, or €4.39 per share, as revenue jumped to €6.38 billion from €2.05 billion, mostly on its share of COVID-19 vaccine sales from Pfizer and Fosun Pharma as well as direct sales to customers in Germany and Turkey. Shares rose 6%.
What other assets are doing
- The ICE U.S. Dollar Index DXY, +0.14%, a measure of the currency against a basket of six major rivals, was up 0.1% at 103.81 after trading near a 20-year high.
- Oil futures pulled back, with the U.S. benchmark CL.1, -2.73% down nearly 3% at $106.50 a barrel. Gold GC00, -0.98% fell 1.1% to trade around $1,863 an ounce.
- The Stoxx Europe 600 SXXP, -2.06% fell 1.9%, while London’s FTSE 100 UKX, -1.73% dropped 1.7%.
- The Shanghai Composite SHCOMP, +0.09% rose 0.1%, while Japan’s Nikkei 225 NIK, -2.53% tumbled 2.5%.
