EDisappointing economic data from China and fears of rapidly rising interest rates weighed heavily on US stock exchanges at the start of the week. Technology shares in particular flew out of the depots, which caused the Nasdaq index to drop by 4.3 percent to 11,623 points. The Dow Jones lost two percent to 32,246 places. The broader S&P 500 fell 3.2 percent to 3,991 points, the first time since late March 2021 again below the 4,000 mark.
“The fear has gotten so big that everything is being sold and the proverbial baby is being thrown out with the bath water,” said Christopher Grisanti, chief equity strategist at MAI Capital Management. Investors were particularly concerned about long-term interest rates. “The higher they go, the more afraid they are of recession or stagflation.”
After a rate hike by the US Federal Reserve of half a percentage point last week, many traders are expecting a further hike of 0.75 percentage points in June. “The concern is that the Federal Reserve will essentially ignore market conditions and stock market volatility and proceed with raising interest rates,” said Matt Stucky, portfolio manager at Northwestern Mutual Wealth Management.
Dollar benefits as a ‘safe haven’
Against this background, the dollar index temporarily climbed to 104.19 points, its highest level since December 2002, before falling again somewhat later. In the current uncertain environment, the world’s leading currency also benefited from its image as a “safe haven”, wrote the analysts at Barclays Bank. Investors watched the military parade in Moscow marking the anniversary of the Soviet Union’s victory over Nazi Germany in 1945 with a worried expression. In a speech, Russian President Vladimir Putin accused the West of preparing an invasion of his country. Contrary to recent fears, however, he did not announce general mobilization or the use of new weapon systems.
The cryptocurrency Bitcoin went under the wheels. The price collapsed by more than 15 percent to $ 30,450 shortly before the close of trading on Wall Street. Ethereum slipped more than 17 percent. “As interest rates rise, investors are turning their backs on risky asset classes and looking for fixed-income alternatives,” said Emden Research analyst Timo Emden. Both cryptocurrencies recovered somewhat after the market closed.
Tesla under pressure
One of the biggest losers was Tesla, which dropped a good nine percent. Supplier Quanta, which manufactures computer circuit boards for the electric car manufacturer, is struggling with increasing numbers of corona infections at its production facility in China. This also applies to Apple. The US company relies on Quanta for its MacBooks. Apple shares fell 3.3 percent. Other technology stocks such as Microsoft, Amazon, Google-owner Alphabet and Meta lost between 2.8 and 5.2 percent.
A media report on the sale of shares in the major investor Ford caused Rivian to collapse by 20.1 percent. Ford is selling eight million of its Rivian shares because the holding period expired on Sunday, CNBC reported over the weekend. According to Refinitiv, Ford was Rivian’s fourth-largest shareholder with an 11.4 percent stake. The electric car maker has lowered its production targets for 2022 because of supply chain problems.
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