Dow Jones plunged by more than 1,000 points Monday, sparked by investor worry over ballooning inflation, rising interest rates and tensions as Russia appears poised for a full-scale invasion of Ukraine.
The index dropped more than three percent, continuing its seven-day losing streak, which analysts blame on anticipated international conflict coupled with a higher cost of living.
The S&P500 also tested investor nerves as it fell for the fifth consecutive day and lost more than three per cent by midday. It is down more than 11 percent over the past month.
Stocks extended their three-week decline on Wall Street and put the benchmark S&P 500 on track to a so-called correction – a drop of 10 per cent or more from its most recent high.
Bitcoin was hit particularly hard by the market instability, at one point dipping below the $33,000 mark and slashing its value by more than half since its historic $68,990.90 high last November.
The S&P500 tumbled for the fifth consecutive day and lost more than three per cent by midday. It down more than 11 percent over the past month
S&P 500 is now on track to a so-called correction – a drop of 10 per cent or more from its most recent high
Within the past 24 hours, about $130 billion was lost in the cryptocurrency market, CNBC reported.
Monday’s market slump trailed last week’s poor performance, when Nasdaq posted its worst week since March 2020. The yield on 10-year Treasury notes also dropped, a sign of investor concern about the economy.
Stocks fell sharply during the first weeks of 2022 as the market readies for the Fed to raise interest rates to offset inflation; the central bank has kept short-term rates near zero since the pandemic hit the global economy in 2020.
A key Fed policy meeting this week will determine how aggressively the central bank seeks to hike interest rates.
It will on Wednesday release its new policy statement, and investors are worried it could include a number of interest hikes throughout the year as America grapples with record inflation.
Some economists have expressed concern that the Fed is already moving too late to combat high inflation.
Other economists say they worry that the Fed may act too aggressively. They argue that numerous rate hikes would risk causing a recession and wouldn´t slow inflation.
Annual inflation hit seven percent in December – the highest increase since 1982 and Americans are feeling the pinch at the gas pumps, grocery stores, and more. The heightened cost of living has wiped out any salary increases Americans might have seen throughout the pandemic, making it more difficult for families to scrape by.
Bitcoin was hit particularly hard by the market instability, at one point dipping below the $33,000 mark and slashing its value by more than half since its historic $68,990.90 high last November
Monday’s market slump trailed last week’s poor performance, when Nasdaq posted its worst week since March 2020. Traders are pictured at the New York Stock Exchange on January 21, 2022
Brutal drops in the market are also triggered by worries that Russia will launch a full-scale invasion over Ukraine, trigging geopolitical conflict in the US, which has supplied Ukraine with boatloads of arms.
Sebastien Galy, senior macro strategist at Nordea Asset Management, said a conflict could lead to a market shakeup in the US – including by shutting Russian banks out of US’s financial system.
‘The closer you get to the cliff, the more nervous [the market] is,’ Galy told The Wall Street Journal. ‘We don’t have the information to trade.’
For some, the depressed market marked the early sign of a markets doomsday.
British investor Jeremy Grantham, a notorious life-long bear who persistently declares corrections are imminent, this week claimed that the US is in an asset ‘superbubble’ that will soon collapse spectacularly.
The tech-heavy Nasdaq, which has fallen for four straight weeks, was also down Monday when it lost more than 500 points.
Technology stocks led the broader decline in the market as investors shift money away from pricier stocks in anticipation of rising interest rates. Higher rates make shares in high-flying tech companies and other expensive growth stocks relatively less attractive.
Apple fell 3.3 per cent and Microsoft shed 4.8 per cent. The technology sector is by far the biggest in the S&P500 and is now down more than 15 per cent so far this year.
The tech sell-off has hit the nation’s top tech billionaires hard, with Elon Musk, Jeff Bezos, Larry Page, Bill Gates and Mark Zuckerberg losing a collective $67 billion in the past week.
Telsa CEO Musk took the biggest hit, with his net worth dropping $25.1 billion, or more than 9 percent, on the week, according to the Bloomberg Billionaires Index.
Europe´s STOXX 600 index closed down 3.6% on concerns about Fed tightening and worries about the situation around Ukraine. The Russian ruble has also fallen.