Megacap Tech bears the brunt of the stock selloff: Markets Wrap

(Bloomberg) — A sell-off in big tech hit stocks hard, with gains in the broader market fading after a report showed Americans grew more pessimistic about the economy’s outlook.

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Traders got another reality check on Tuesday after worrying data on consumer confidence. A measure of expectations, reflecting a six-month outlook, fell to the lowest in nearly a decade. The S&P 500 quickly erased gains, while giants like Amazon.com Inc. and Tesla Inc. sent the Nasdaq 100 down more than 2%. The dollar rose.

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Federal Reserve Bank of New York President John Williams and his San Francisco counterpart Mary Daly played down the risks of a recession. Officials have opted for more aggressive hikes as they battle inflation at its highest in 40 years, following criticism that they left monetary policy too easy for too long.

“The only thing we can say with conviction is that high market volatility is likely to persist until there is clear evidence that inflation is abating and the Fed pivots to a less aggressive stance, away from the fate of recession,” he said. Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management.

Despite growing fears of an economic downturn, analysts remain bullish on corporate earnings, with net margin estimates for S&P 500 companies at a record high.

For Goldman Sachs Group Inc. strategists, margin forecasts are too optimistic, putting stocks at risk of further losses when Wall Street analysts lower their expectations. Meanwhile, HSBC Plc’s Max Kettner said stocks have yet to reflect the impact of a potential recession, and earnings expectations are at risk of being revised down.

Cathie Wood said Tuesday that she was wrong in her prediction that inflation would unravel as prices for goods and services in the US soar to 40-year highs.

“We got one thing wrong, and that was that inflation remained as sustained as it has been,” Wood, founder and CEO of Ark Investment Management, told CNBC. “Supply chain: I can’t believe it took more than two years, and Russia’s invasion of Ukraine, of course, we couldn’t have seen that. So inflation has been a bigger problem. But I think it has set us up for deflation.”

Meanwhile, a key set of rates the Fed is focusing on to help judge financial conditions is still far from levels that could prompt policymakers to halt their tightening plans. Inflation-adjusted US rates at the shorter end of the curve are still stuck below zero, even as real rates on longer-dated securities rose this month to levels not seen since 2019.

Elsewhere, oil rose for a third day in a row as threats to global production aggravate already scorching markets for physical supplies and China eased its quarantine time for new arrivals.

What to watch this week:

  • US GDP, Wednesday

  • ECB President Christine Lagarde, Federal Reserve Chairman Jerome Powell, BOE Governor Andrew Bailey and Cleveland Fed President Loretta Mester will speak at the ECB event on Wednesday.

  • St. Louis Fed President James Bullard speaks Wednesday

  • China PMI Thursday

  • US personal income, PCE deflator, initial jobless claims, Thursday

  • Eurozone CPI Friday

  • US Construction Spending, ISM Manufacturing, Friday

This week’s MLIV Pulse survey looks at earnings prospects and stock prices. Click here to participate.

Some of the main movements in the markets:

Stocks

  • The S&P 500 fell 1.4% at 1:37 p.m. New York time.

  • The Nasdaq 100 fell 2.3%

  • The Dow Jones Industrial Average fell 0.9%

  • MSCI World Index fell 1%

coins

  • The Bloomberg Dollar Spot Index rose 0.4%

  • The euro fell 0.6% to $1.0519

  • Sterling fell 0.6% to $1.2186.

  • The Japanese yen fell 0.6% to 136.24 per dollar

Captivity

  • The 10-year Treasury bond yield was little changed at 3.19%

  • Germany’s 10-year yield advanced eight basis points to 1.63%

  • Britain’s 10-year yield advanced seven basis points to 2.46%

raw Materials

  • West Texas Intermediate crude rose 1.8% to $111.57 a barrel.

  • Gold futures fell 0.2% to $1,820.80 an ounce.

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