After a brief rebound on Monday, the Dow fell about 580 points, or 1.7%, in the afternoon as fears of an economic slowdown fed April’s sell-off.
Mega-cap tech stocks lead losses as investors await earnings reports this week. After today’s conference call, Microsoft and Alphabet, Google’s parent company, will release their first-quarter results.
While the S&P fell 1.6%, the tech-index Nasdaq fell about 3%, further falling into the bear market.
Last Friday, the Dow fell about 980 points, or 2.8%, after Federal Reserve Chair Jerome Powell said next month will see aggressive rate hikes. Although the Fed intends to quell runaway inflation with its rate hike, investors are more concerned that it will slow consumer spending and the housing market, resulting in a recession.
Fast-growing tech stocks are closely linked to the whims of the Fed. These interest-rate-sensitive companies have high price-to-earnings ratios because they’re typically valued at future earnings and don’t pay dividends. Higher interest rates mean future earnings are worth less than they are today.
Stocks that are cyclical in nature also fell on Tuesday. UPS and 3M’s shares, for example, dropped by about 3%. They were the only two Dow Jones components to beat earnings expectations.
GE’s shares are down more than 11% after they warned that their 2022 guidance is “leaning towards the lower end of the range.”
Asian markets fell as China’s economic situation worsened because of its zero-Covid policy. As a result, an increase in global supply chains will be disrupted, which is bad for the US technology and semiconductor market.
Investors are also wary of the geopolitical turmoil surrounding Russia’s invasion of Ukraine and nuclear threats. A senior Russian official said Tuesday that “threats” of war were real and very serious.
Dow Jones technical analysis:
The Dow Jones price remains depressed below the key SMAs on the 4-hour chart. As a result, the index may plunge further to test the previous swing lows.