Stock Market Sell-Off: 3 Reasons Why It Could Be Over The Motley Fool

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PC revenues and margins at HP were “much better than expected,” according to Citi Research analyst Asiya Merchant. Meanwhile, at Best Buy, laptop sales growth inched into positive territory. Salesforce shares, meanwhile, are off more than 21% and headed for their worst single-day percentage drop in two decades. Other stocks are partially counteracting Salesforce’s hugely negative influence, as the Dow itself is off about 282 points, with 24 of 30 constituents in positive territory. The Russell 2000 index of small-cap stocks was up 1.1% on Thursday, while the S&P 50 index was 0.3% lower and the Dow Jones Industrial Average was off 0.8%, according to FactSet.

Near-term Fed rate cuts seem likely

The 2-year Treasury continues to rise to fresh 20-year highs, at 4.195%, while the benchmark 10-year Treasury is 3.734%. The problem for Wall Street is that even if more stocks were to rise, they’ll need to do so by more than Big Tech stocks are falling because of the group’s huge influence. At Alphabet, meanwhile, investors’ patience with the company’s big AI investments may also be running thinner.

Oil Futures Rise as U.S. Reports Fourth Straight Supply Draw

The larger challenge for Alphabet may have simply been how much its stock has already rallied, nearly 50% in the 12 months through Tuesday, on expectations for continual growth. Among the region’s technology shares, Samsung Electronics fell 1.8%, while Nintendo lost 2.6%. Also, the number of jobless claims in the first week of August declined by 17,000 from the previous week to 233,000. The losses were due, in part, to earnings yesterday from Alphabet and Tesla that didn’t live up to Wall Street’s high expectations.

Stock Market Sell-Off: 3 Reasons Why It Could Be Over

The tech sector could be under heavy pressure in Asia today,” said Anderson Alves at ActivTrades. Additionally, Fed Chair Jerome Powell is set to speak before Congress this Wednesday as part of semi-annual monetary policy testimonies. This will mark Powell’s first major public speech since the January Fed meeting, where he told reporters that Fed officials want to see more “good data” before opting to lower interest rates. Oil futures snap a multi-day losing streak as the EIA reports bigger-than-expected drawdowns in crude oil and product stocks.

Shares of EV maker Tesla are currently the worst performer in the Nasdaq 100. Advertising technology company Trade Desk comes in a close second. Alphabet’s latest performance showed that advertising growth is slowing down. Big tech names collectively lost billions in market value after quarterly results from Alphabet and Tesla disappointed, kicking off the tech earnings season on a sour note. Google-parent Alphabet’s latest performance showed advertising growth is slowing.

With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree. In energy trading, benchmark U.S. crude lost 57 cents to $77.02 a barrel. Brent crude, the international standard, fell 57 cents to $80.25 a barrel. That wasn’t as steep as Tesla’s drop, but it was still the single heaviest weight on the S&P 500 because its total market value tops Tesla’s.

  1. Tesla, meanwhile, offered a fourth straight quarter of disappointing earnings.
  2. It was down 568 points, or 1.4%, while the S&P 500 has dropped 1.1%.
  3. Stocks took a broad downturn Thursday as the tech selloff became an everything selloff.

Google parent Alphabet’s drop of 4% today represents a loss of billions in market cap. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. It’s still possible that the current stock market rebound could merely be a “dead cat bounce.” Such bounces don’t last long and give investors a false sense of hope.

From early June to mid-August, stocks rallied hard on hopes that inflation was finally cooling off, a recession this year was unlikely, and that the Fed might soon let up on rate hikes. The market rally had already stalled out by the time Powell was lecturing the markets in Montana. His blunt remarks underscored that the interest rate hikes would not end soon and that the Fed was prepared to slow the economy, if necessary, to kill inflation. The markets are still heading lower two days after the Federal Reserve delivered its fifth consecutive rate hike this year. Alphabet dropped 5% even though it delivered better profit and revenue for the latest quarter than expected. Analysts pointed to some pockets of weakness, including weaker growth in advertising revenue for YouTube than expected.

Indeed, the S&P 500 and Nasdaq Composite both opened in the red but are making notable movements towards the green. Powell is expected to shine a light on the current state of the economy, as well as explain the country’s path forward as it pertains to monetary policy. The Nasdaq had its worst day since 2022 on Wednesday, and the rest of the market didn’t fare much better. The S&P 500 was on pace for a 4.3% monthly gain in May through Thursday, despite a 1% retreat for the week, according to FactSet. The Dow was down 262 points, or 0.7%, at last check, trading near 38,177. The index captured headlines only a few weeks ago when it eclipsed 40,000 for the first time in history, only to falter in the last two weeks of May.

Today’s sharp downdraft is only the latest chapter in the wild market moves we’ve seen throughout 2022. Rate cuts are good for businesses because it lowers their borrowing costs. While the stock market doesn’t always rise following a reduction in interest rates, it often does. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

The Dow booked a third straight day of losses, falling 2.5% for its biggest 3-day decline since Oct. 27, according to Dow Jones Market Data. Although the Nasdaq began the day in the green, the attempted rebound from its ugly session on Wednesday failed. The tech sector remained under pressure, with chip makers dropping over fears of stricter curbs on exports to China.

Specifically, should the report show that unemployment is rising, it may encourage the Fed to lower interest rates sooner than later. U.S. stocks closed lower on Thursday, weighed down by slumping technology stocks, including the roughly 20% drop in shares of Salesforce Inc. The technology-heavy Nasdaq is already up double digits for the year, so investors are taking profits by selling. And the Dow, which had finally popped in the last few days, is also subject to profit taking Thursday, leading to the declines. With the market betting the Federal Reserve will cut interest rates in September, investors also have been selling tech stocks to weight their portfolios towards other areas of the market.

Meanwhile, yields on bonds are falling, meaning prices are rising. The 10-year Treasury bond now yields just 4.2%, down from 4.5% at the start of July. The two-year bond is priced at 4.4% and the 30-year is at 4.5% as the yield curve continues to flatten. But the indices have become heavily dependent on the biggest cloud stocks, which may be in the process of rolling over.

The technology-heavy Nasdaq Composite has dropped 1.2%, while the S&P 500 has fallen 1.1%. With all three major stock indexes deep in the red Thursday, most sectors are feeling the pain. Get Forbes Advisor’s expert insights on investing in a variety of financial instruments, from stocks and bonds to cryptocurrencies and more. “Headline inflation is likely past peak, but the Fed still has work to do. The Fed will likely increase rates again by 75 basis points as core inflation is not cooling as fast as expected,” said Jeffrey Roach, chief economist for LPL Financial.

Well, it appears traders are showing a bit of anxiety to start the week ahead of the February jobs report. Indeed, it’s the final employment data release before the Federal Reserve’s upcoming policy meeting. As such, it holds additional weight in informing the central bank’s decision on whether to cut rates.

The largest peak to trough drop this year that it has to beat was 7.06% from April 11 to April 19. HP and Best Buy shares are now leading S&P 500 gainers by a wide margin on the day. HP shares are up 18%, while Best Buy shares are ahead 12%. The next biggest advancer, Enphase Energy’s stock, is up just over 4%.

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