Monday, May 29

The causes behind the worst week on Wall Street since the coronacrash

For the week, the S&P 500 lost 5.7%, the Dow Jones dropped 4.6% and the Nasdaq fell 7.6%. Both the Nasdaq and the S&P 500 posted their biggest weekly percentage decline since March 2020, while the Dow Jones since October 2020.

“The Fed (central bank) is still the big news”explains Ross Mayfield, an analyst at financial consultancy Baird. Investors believe that “It seems more aggressive with each new statement, with each new information and logically that is bad for technology and growth stocks.”

“It really has been a continuation of the technology grind,” said Paul Nolte, portfolio manager at Kingsview Investment Management. “It’s really a combination of a rotation away from technology, as well as very poor numbers from Netflix, which I think is the catalyst for today.”

“Fears of a more aggressive policy from the Federal Reserve continue to wreak havoc, with the decline in its bond purchases impacting liquidity and a rate hike on the horizon, the market dumps tech stocks“, assured Carjuan Cruz for Investing.

According to Hugh Gimber, Vice President of Global Market Strategy at JP Morgan, technology companies will continue to be the most affected, as long as this risk aversion continues, foreseeing the consequences of this more aggressive policy of the Fed and its consequences in the economy and the markets.

Some analysts speak of an increase of 50 basis points in the Fed rate (0.50 percentage points) in March, although the institution generally proceeds by increases of a quarter of a percentage point (0.25%).

Friday was also the protagonist, the pronounced decline of Netflix, hit after its announcement on Thursday of a disappointing growth forecast for its subscribers. The company lost 21.79% in the value of its shares to $397.50 and in two months accumulates a loss of 43%, returning to its April 2020 valuation, at the beginning of the pandemic.

Other values ​​accompanied the fall of Netflix, in particular the stars of the pandemic that shone until last November as the trading site in Shopify line (-13.85%) and the Roblox gaming platform (-8.57%).