Both the Nasdaq and S&P 500 are heading for their worst day in a year and a half. The global stock market turmoil will hit the US stock markets on Monday.
All three benchmarks on Wall Street continued the negative trend from Friday.
This is what it looked like around 6.30 pm:
- The Dow Jones is down 3.12 percent
- The S&P 500 is down 3.93 percent
- The Nasdaq Composite is down 3.9 percent
The stock indices S&P 500 and Nasdaq are heading for their worst day since June 2020.
It was a heavy last week on Wall Street. The Nasdaq Technology Index had its worst trading week since October 2020.
The benchmark index S & P 500 had its worst week since March 2020, and has fallen more than 10 percent since the last peak – known as a correction.
The world’s financial markets are characterized by a downturn on Monday. In Frankfurt, the Dax index is down over 3 percent, and the same applies to the CAC 40 index in Paris. In London, there is also a marked fall. The Oslo Stock Exchange closed down 3.45 percent.
The fear index «Vix» shoots to the highest level since November 2020, to over 38 points. The Vix index is a temperature gauge for market volatility. The index will normally rise a lot in uncertain times where stock markets fall a lot.
Interest rate fears in jerks and jerks
It is again the concerns related to future interest rate rises that create unrest in the markets, says Olav Chen, head of allocation and global interest rates in Storebrand Asset Management
– It’s really quite simple. Given the big picture, there are effects that are propagating in the markets, now that monetary policy is about to normalize, he says.
– We have been talking about fear of interest rates and fear of inflation for a long time now, and this is going in jerks, Chen says.
The US Federal Reserve signaled in December that interest rates would be raised, and that it would start in March. The broad expectation is that there will be four interest rate hikes from the Federal Reserve in 2022. This has contributed to a heavy start to the year in the global financial markets.
Chen thinks the market took too lightly the complete reversal of the Fed when it happened, and that it helps to explain the results today and so far this year.
The world stock markets are now waiting for Wednesday’s interest rate meeting at the US Federal Reserve.
– All eyes are on the Fed meeting, although no change is expected now. That there will be interest rate increases is a “done deal”, so the question is what happens to the other measures, says Chen.
Decline for the tech sector
Netflix shares weighed heavily on Nasdaq before the weekend, plunging more than 20 percent after subscription growth was below the company’s own expectations in the fourth quarter.
The fall continues for Netflix on Monday, and the share is down over 10 percent at 17.30.
– With Netflix, it probably turns out that you see the light at the end of the tunnel with the pandemic in mind. Tech stocks went like a bullet in the start of the pandemic, with home office and binging of TV series instead of going out. It is now about to turn around, he says.
Tech giants Apple, Microsoft and Tesla, all of which will launch results this week, also fall on Wall Street on Monday. They are down 2.75 percent, 4.10 percent and 7.19 percent, respectively.
He explains that the tech sector was greatly affected by interest rate policy.
– Without cutting everyone across a ridge, there is some overlap between tech and growth stocks, which have much of their income going forward. When interest rate policy changes, it takes effect. For example, we have twisted the portfolio in the direction of less interest-sensitive equities.
Ukraine is creating unrest
At the same time as fear of interest rates is helping to weigh on the markets, the tense situation between Russia and Ukraine also contributes to unrest. Both the United States and the United Kingdom have now announced that they are withdrawing their embassy staff for fear of war in the country.
The Moscow Stock Exchange fell over 8 percent on Monday afternoon, and is down over 19 percent so long this year.
– All the news from the weekend is pretty bad. No one will be sitting with shares in Russia, so everything is sold today, says Viktor Szabo in Aberdeen Standard Investments to Financial Times.
– Ukraine is far ahead in consciousness now. For the last 12 years, the general mentality for investors has been to buy down in a valley of waves. For the first time in the last 12 years, it does not feel like it is the standard attitude, says chief analyst Michael Hewson in CMC Markets to Reuters.