By U.S. stocks fell sharply Monday, building on technical weakness following last week’s volatile price action as investors fretted over the threat of stagflation as the Federal Reserve tightens policy in a bid to rein in surging price pressures.
What’s happening
The Dow Jones Industrial Average
DJIA,
-1.21%
fell 630 points, or 1.9%, to 32,267.
The S&P 500
SPX,
-2.00%
lost 116 points or 2.8%, to trade at 4,007, hitting its lowest intraday level since early April 2021, according to FactSet.
The Nasdaq Composite
COMP,
-2.68%
slumped 445 points, or 3.7%, to 11,698 — its lowest intraday level since November 2020.
The Dow and S&P 500 each slipped 0.2% last week, while the technology-heavy Nasdaq fell 1.5%. The weekly declines came after wild swings for major indexes, surging on Wednesday and falling sharply on Thursday.
Cryptocurrencies fell over the weekend as well, with bitcoin
BTCUSD,
-6.39%
dropping below the $35,000 level, down nearly half from its record high set in November.
What’s driving markets
Stocks slumped to end the week after Fed Chairman Jerome Powell said the central bank was not considering a 75-basis-point rate hike, leading some to question whether the Fed is doing enough to control inflation. The Dow tumbled more than 1,000 points Thursday, marking its worst day in five years, a day after jumping 900 points for its best day since 2020.
Read: Will Fed go too far? Dow’s violent swings put investors on lookout for recession signals
“Nuveen’s Global Investment Committee continues to believe a recession isn’t imminent, given a historically tight labor market with nearly two job openings for every unemployed person and aggregate income growth running well above inflation,” said Saira Malik, chief investment officer at Nuveen, in a note.
“Despite the healthy labor picture, markets are rapidly repricing to account for the odds of lower economic growth, more persistent inflation and tighter monetary conditions. Until any of these three dynamics changes, investors should expect continued market swings in both stocks and longer-duration bonds,” she said.
Treasury yields surged early Monday, with the 10-year rate
TMUBMUSD10Y,
3.086%,
briefly ticking above 3.20%, before pulling back. Real, or inflation-adjusted, yields continued to rise.
A surge in yields is a negative for stocks, particularly tech and other growth shares whose valuations are based on profit and cash flow far into the future. Rising yield on risk-free Treasurys cuts the present value of those future flows.
Analysts said weak Chinese trade data contributed to pressure risky assets. Government customs data showed exports rose 3.7% year over year in April, down sharply from growth of 15.7% in March, news reports said. Imports edged up just 0.7%, reflecting tepid demand.
The release of the April jobs report on Friday did little to move the dial ahead of Wednesday’s release of the consumer price index.
“Overall, the release of the U.S. employment report for April failed to excite traders as despite the nonfarm payrolls figure remaining relatively at the same levels as in March and not dropping as the market expected, the unemployment rate failed to tick down and remained unchanged,” said Peter Iosif, senior research analyst at Noteris.
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Companies in focus
Shares of Uber Technologies Inc.
UBER,
-6.61%
fell 7.7% after CNBC reported that the ride-sharing and food-delivery company is planning to cut spending on marketing and incentives and slow hiring, citing an email sent by CEO Dara Khosrowshahi to staff on Sunday.
Palantir Technologies Inc.
PLTR,
-19.08%
shares dropped 21.8% after the software company fell short of expectations with its latest earnings and outlook.
BioNTech SE
BNTX,
+6.10%,
the U.S.-listed biotech company, said its first-quarter profit more than tripled to €3.7 billion ($3.9 billion), or €14.24 per share, from €1.13 billion, or €4.39 per share, as revenue jumped to €6.38 billion from €2.05 billion, mostly on its share of COVID-19 vaccine sales from Pfizer and Fosun Pharma as well as direct sales to customers in Germany and Turkey. Shares rose 6.1%.
What other assets are doing
The ICE U.S. Dollar Index
DXY,
-0.06%,
a measure of the currency against a basket of six major rivals, was up 0.3% after trading near a 20-year high.
Oil futures pulled back, with the U.S. benchmark
CL.1,
-4.87%
down 4.5% below $105 a barrel. Gold
GC00,
-1.16%
fell 1.1% to trade around $1,861 an ounce.
The Stoxx Europe 600
SXXP,
-2.90%
fell 2.6%, while London’s FTSE 100
UKX,
-2.32%
dropped 2.1%.
The Shanghai Composite
SHCOMP,
+0.09%
rose 0.1%, while Japan’s Nikkei 225
NIK,
-2.53%
tumbled 2.5%.
