The US stock market moved significantly lower yesterday, with the broad-based S&P 500 losing 1.7% and the Dow Jones Industrial Average falling by 1.2%. The NASDAQ Composite Index showed an even greater decline of 2.2%. Last week, the index fell even lower by 3.9%.
There are a number of reasons behind such a significant decline in US indices. First, investors are concerned about the plans of the US Federal Reserve to continue monetary tightening in order to combat rising inflation.
Against this backdrop, US Treasuries yield is growing. Yesterday, it rose to 2.779% from the level of 2.713% on Friday. This is the highest rate in the last three years.
The second cause of concern is the spread of COVID-19 and the re-introduction of lockdowns in China, which, in turn, affects oil prices. Oil has been losing ground for several weeks now. Brent crude has depreciated by 4.2% to $98.48 per barrel. In addition, the fact that some countries continue to buy oil from Russia lowers the demand.
Starting this week, companies will reveal their earnings reports for the first quarter of this year. Such major companies as JPMorgan Chase, The Goldman Sachs, Morgan Stanley, and Citigroup will start first. Some experts believe that even if companies show strong reporting results for the past quarter, the outlook will still remain pessimistic. Therefore, stock indices are unlikely to show strong gains this year.
Also, the data on US inflation will be published this week. Analysts expect consumer prices to rise to 8.5% compared to 7.5% in February.
Among the companies included in the Dow Jones Industrial Average, Microsoft Corp. (-3.9%) and Cisco Systems Inc. (-2.6%) posted losses. However, the securities of other companies showed a slight increase in value (up to 0.7%). Among them are Verizon Communications, Dow Inc., Travelers Cos. and 3M Co.
After Elon Musk announced that he would not be joining Twitter's board of directors, the value of the company's shares went up by 1.7%. At the same time, Tesla stocks fell by 4.8% despite the fact that the company increased deliveries of its electric cars produced in China by 2% in the first quarter of 2022.
Thanks to the split of AT&T and the spin-off of the film and television divisions into a separate company, AT&T's shares jumped by 7.7%. The stock of Warner Bros. Discovery added 1.3%.
Shares of American Express Co. dropped by 3.3% after JPMorgan experts downgraded the company's rating, citing concerns over valuation at the time of increased uncertainty over economic growth.
Thanks to Shopify's announcement of a 10-to-1 stock split, the value of the company's securities rose by 2.4%.
Meanwhile, Thoma Bravo announced a major $6.9 billion deal to acquire SailPoint Technologies Holdings. The shares of the latter have soared by 29%.
Another upcoming major acquisition is planned by Kaseya Ltd. who buys its competitor Datto Holding Corp. for $ 6.2 billion. Amid this news, the shares of the latter surged by 21%.
Notably, stock indices of other regions are also declining. Thus, the European indicator STOXX Europe 600 fell by 0.6%. China's stock market is also down due to the lockdowns imposed to stop the spread of the coronavirus in the country. Thus, indices of the Shanghai and Shenzhen stock exchanges lost 3.1%, while the Hong Kong Hang Seng went down by 3%.
