After Monday’s late day rally and remarkable turnaround in the equity space, investors were hopeful that the recovery would consolidate in the near term, but those upbeat expectations were dashed on Wednesday by a brutal and widespread sell-off triggered by mounting economic worries.
At the closing bell, the S&P 500 plunged 2.81% to 4,175, weighed by a 12% plunge in Tesla share prices, with most sectors in the index down except energy, which notched a tiny gain. The Dow Jones, for its part, dropped 2.38% to 33,240, closing at its worst level since mid-March, dragged down by a steep decline in global consumer bellwether Nike. Meanwhile, the Nasdaq 100 led losses on Wall Street and plummeted 3.87% to 13,009, re-entering into bear market territory and setting a new 2022 low amid widespread tech weakness.
There was no specific catalyst that triggered today's rout, other than growing fears that the U.S. economy is headed for a downturn on the assumption that the Fed's aggressive tightening cycle in response to soaring inflation will strangle growth and undermine corporate profits in the future. Risk aversion was evident in the bond market, with Treasury prices higher across the board.
Faced with rising volatility (VIX above 30) and traders fading every single rally, risk appetite will remain subdued in the near term, creating headwinds for stocks and preventing a sustainable rebound in the major averages. While quarterly results and forward-looking commentary during the current reporting period have been healthy for the most part, investors have not cared and continued cut risk exposure, even dumping companies that have posted robust earnings growth and issued constructive guidance, such as Tesla.
Although pessimism and selling activity appear overblown, current dynamics may persist at least until next week when the FOMC announces its May monetary policy decision. If the U.S. central bank manages to convince investors that they will engineer a soft economic landing and won’t spark a recession, the stock market could begin to stabilize, paving the way for a more lasting rebound. Whether or not this scenario will play out is uncertain, but traders should not pin all their hopes on the Fed, as four-decade high inflation limits policymakers' alternatives.
Following the recent sell-off, the Nasdaq 100 set a new 2022 low near 13,000 mark, a key support zone as shown in the daily chart below. With the index in a bear market and sentiment souring each day, a break below 13K area seems increasingly likely. If the bearish scenario plays out and sellers push price beneath that floor decisively, we could see a move towards 12,630 in the coming sessions, and possibly 12,225.
On the other hand, if buyers resurface and manage to trigger a rebound, initial resistance lies at 13,720. On further strength, the focus shifts higher to the 50-day simple moving average, followed by 14,300, but even if those resistance levels were taken out, the technical damage has been so extreme that the balance of risks would still tip to the downside for the tech benchmark.
At the closing bell, the S&P 500 plunged 2.81% to 4,175, weighed by a 12% plunge in Tesla share prices, with most sectors in the index down except energy, which notched a tiny gain. The Dow Jones, for its part, dropped 2.38% to 33,240, closing at its worst level since mid-March, dragged down by a steep decline in global consumer bellwether Nike. Meanwhile, the Nasdaq 100 led losses on Wall Street and plummeted 3.87% to 13,009, re-entering into bear market territory and setting a new 2022 low amid widespread tech weakness.
There was no specific catalyst that triggered today's rout, other than growing fears that the U.S. economy is headed for a downturn on the assumption that the Fed's aggressive tightening cycle in response to soaring inflation will strangle growth and undermine corporate profits in the future. Risk aversion was evident in the bond market, with Treasury prices higher across the board.
Faced with rising volatility (VIX above 30) and traders fading every single rally, risk appetite will remain subdued in the near term, creating headwinds for stocks and preventing a sustainable rebound in the major averages. While quarterly results and forward-looking commentary during the current reporting period have been healthy for the most part, investors have not cared and continued cut risk exposure, even dumping companies that have posted robust earnings growth and issued constructive guidance, such as Tesla.
Although pessimism and selling activity appear overblown, current dynamics may persist at least until next week when the FOMC announces its May monetary policy decision. If the U.S. central bank manages to convince investors that they will engineer a soft economic landing and won’t spark a recession, the stock market could begin to stabilize, paving the way for a more lasting rebound. Whether or not this scenario will play out is uncertain, but traders should not pin all their hopes on the Fed, as four-decade high inflation limits policymakers' alternatives.
Following the recent sell-off, the Nasdaq 100 set a new 2022 low near 13,000 mark, a key support zone as shown in the daily chart below. With the index in a bear market and sentiment souring each day, a break below 13K area seems increasingly likely. If the bearish scenario plays out and sellers push price beneath that floor decisively, we could see a move towards 12,630 in the coming sessions, and possibly 12,225.
On the other hand, if buyers resurface and manage to trigger a rebound, initial resistance lies at 13,720. On further strength, the focus shifts higher to the 50-day simple moving average, followed by 14,300, but even if those resistance levels were taken out, the technical damage has been so extreme that the balance of risks would still tip to the downside for the tech benchmark.
Note
Note from the editor: Our goal is to help everyone find information and ideas about investing, asset ownership, and wealth creation.We believe in a free exchange of ideas for investing, income generation, and wealth building. We boast an A-list of industry analysts, writers, and experts who contribute to our research.
While we do not offer investment advice, We do provide our readers with a wealth of information from multiple sources to help them complete their due diligence.
This forward-thinking approach allows us to deliver unique viewpoints and investment ideas to our readers...
Viewpoints and ideas that you just won’t find anywhere else. Our readers count on us to deliver perspectives on the markets and the economy they won’t find in the mainstream media.
Our publication was created to help our readers identify the best opportunities for building wealth...
Our mission is simple – to provide the world with the latest ideas on investment trends and opportunities... There is always a bull market somewhere.
As you know, making massive gains from investing is easier said than done.
Like so many of our readers, you see the “investment experts” talking about their huge wins and successes…
You see the “legendary” stock picks that got 1000% returns in one day, and “The One Device” that’s going to “change everything.”
So, like some of our readers, you may have paid for those products…
And then you may have received something that doesn’t fulfill the promises they made to you… Every investor in the world loses money sometimes. No matter how famous. No matter how successful…
And if someone isn’t transparent with you about their losses, they’re basically not helping you learn from their mistakes.
So if an “expert” isn’t willing to show you their losses… and therefore protect you from making the same mistakes they did… How and why are they going to help you?
It’s common sense. We believe you should demand transparency when it comes to something as important as your investments.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.