Tech stocks suffered their worst sell-off this week, adding to an already turbulent start to 2022.
Stocks fell, posting their worst week of market turmoil since the pandemic began, with tech stocks bearing the brunt of shaky corporate earnings and an uncertain outlook for U.S. interest rate hikes.
The S&P 500 closed below the 200-day moving average, a key technical level, for the first time since 2020. The tech-heavy Nasdaq 100 fell the most among major benchmarks on Friday, with streaming giant Netflix Inc. down more than 20%. Bitcoin tumbled amid a prolonged sell-off in cryptocurrencies, briefly dipping below 38,000. The dollar fell to its lowest level in more than five months.
The volatility that has gripped markets this month showed little sign of abating on Friday, with the S&P 500 falling for a fourth straight day, extending losses during the period to 5.7%, its worst weekly loss since March 2020, albeit with some shorten. More than $3 trillion in options expiry added to market volatility.
“I think it’s the longest short week in history, right?” Jay Pelosky, founder and president of TPW Investment Management, said on Bloomberg TV. “It’s just a four-day week and it feels like two weeks in one.”
U.S. companies have had a mixed earnings season so far, underscoring the risk that it may fail to enliven animal spirits in the stock market. While Netflix’s disappointing subscriber outlook sent its shares plunging, Peloton Interactive Inc. said it was poised to bounce back after the stay-at-home darling was hit by reports of a temporary shutdown.
Markets are also bracing for a rate hike by the Fed. Economists polled by Bloomberg expect policymakers to raise interest rates for the first time in more than three years in March and shrink their balance sheets soon after. Geopolitical tensions have also added to the unease. Reports that Washington has allowed some Baltic states to send U.S.-made weapons to Ukraine have raised fears of a standoff with Russia.
“There are many risks to the global economy, including geopolitical events,” wrote Ethan Harris, head of global economics at Bank of America Global Research. “However, in our view, the biggest near-term risk lies ahead: the Fed is seriously behind the curve and inflation must be taken seriously.”
Safe-haven demand pushed the 10-year Treasury yield down more than 10 basis points in three days to 1.76%, sending the rate lower in a week for the first time in five.
The sell-off in the stock market has made the VIX reflect more recent volatility than the future. This setup is called an inverted VIX. This inversion of the curve has occurred four times in the past year, and all have coincided with a market bottom.
“We’ll all breathe a sigh of relief once this meeting is finally over, and then we can end the week because it’s been painful,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors in Torrance, Calif.
Some major trends in the market:
- The S&P 500 was down 1.9% as of 4 p.m. in New York
- The Nasdaq 100 fell 2.7%
- The Dow Jones Industrial Average fell 1.3%
- MSCI World Index fell 1.8%
- Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.3% to $1.1345
- Sterling fell 0.3% to $1.3557
- The yen rose 0.4% to 113.68 against the dollar
- The 10-year Treasury yield fell 5 basis points to 1.76%
- German 10-year bond yields fell 4 basis points to -0.06%
- UK 10-year bond yields fell 5 basis points to 1.17%
- West Texas Intermediate crude fell 0.7% to $84.91 a barrel
- Gold futures fell 0.7% to $1,832.70 an ounce