The Stock Market Keeps Plunging

The Stock Market Keeps Plunging

access_time2022-05-11 10:30:54

The S&P 500 has now registered five consecutive weekly declines, its longest streak of losses since June 2011. Stocks rallied earlier last week, before suffering their largest-single day drop since the start of the pandemic on Thursday. Futures point to another drop in U.S. stocks this morning.

What’s driving the wild swings?  The financial markets are coming to grips with a stunning policy change by the Federal Reserve,  writes The Times columnist Jeff Sommer . Markets have become so accustomed to the Fed’s loose monetary policy of the past two decades that investors don’t know how to react now that the central bank is pulling back and trying to slow the economy. “This is a very big change, and the markets are having trouble processing it,” said Robert Dent, senior U.S. economist for Nomura Securities.

Adding to the uncertainty are continued lockdowns in China, surging inflation, supply constraints and a spike in oil prices.  That has complicated the outlook for the global economy, though some Wall Street forecasters remain optimistic. In a research note published yesterday, Goldman Sachs said that it forecasts a recovery in major equity indexes. “The tightening in U.S. financial conditions has somewhat rebalanced the risks to the Fed’s mandate and potentially set the stage for a stabilization in the financial market environment,” the note said.

Tech stocks and crypto prices are falling again.  Bitcoin this morning hit its lowest level since July 2021. Tech companies, both global powerhouses and start-ups, are also feeling the pain. Share prices for Netflix, Meta and Peloton are all down substantially this year. Some strategists are saying prices could continue to fall until they land back where they were before the pandemic. For tech stocks, that would be a further 25 percent drop. For crypto, it could be a plunge of more than 60 percent.

With some tech companies freezing hiring or laying off employees, investors are split . Some see a temporary slowdown, while others say it is a sign of a deeper slump to come,  The Wall Street Journal reports . Elon Musk, on the other hand,  has told investors   that Twitter could quintuple its revenue by 2028.


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