Dow craters 1,060 points for worst day in nearly 2 years as tech-stock weakness wipes out Fed rally
Posted On May 5, 2022
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- US stocks fell on Thursday, with the Dow plunging nearly 1,100 points, erasing all of yesterday’s gain.
- Investors are digesting the Fed’s decision to raise interest rates by 50 basis points.
- E-commerce companies plunged after poor earnings results and guidance from names like Shopify and Etsy.
US stocks plunged on Thursday, with the Dow Jones Industrial Average falling 1,060 points and wiping out Wednesday’s rally. The Nasdaq 100 fell as much as 6%, while the S&P 500 was down about 4%.
Thursday’s decline represented the Dow’s worst day since June 11, 2020, when the 30-member index plunged more than 1,800 points. Despite the sharp intra-day volatility , the Dow Jones and S&P 500 are only down 0.5% so far this week.
Investors continue to digest Federal Reserve Chair Jerome Powell’s comments from yesterday’s meeting of the Federal Open Market Committee, which helped spark a near-1,000 point rally in the Dow at the end of Wednesday’s session, representing its best day since 2020.
The Fed raised interest rates by 50 basis points, as was expected, but Powell said during his question-and-answer session that a 75-basis-point rate hike is currently not under consideration by the central bank. Additionally, the Fed said it would begin to unwind its balance sheet starting in June.
Here’s where US indexes stood at the 4:00 p.m. ET close on Thursday:
Meanwhile, first-quarter corporate earnings continued to roll in, and most are beating analyst estimates. Of the 351 companies on the S&P 500 that have already reported earnings, 78% of them topped profit estimates by a median of 8%. On the revenue front, 70% of companies have beaten estimates by a median of 5%, according to data from Fundstrat.
E-commerce companies plummeted on Thursday after companies like Shopify, Etsy, and Wayfair announced disappointing first-quarter results and guidance. Shares of the three e-commerce companies plunged as much as 18% on Thursday.
The Bank of England raised interest rates by 25 basis points for the fourth consecutive meeting on Thursday, even as it predicted a rapid slowdown in economic growth. The latest hike lifted rates to 1%, the highest level since 2009.
Twitter stock was higher Thursday after Elon Musk disclosed $7 billion in new funding commitments for his $44 billion takeover of the social-media platform. In a regulatory filing, Musk said he recieved letters from 19 investors. Top commitments include $1 billion from Oracle co-founder Larry Ellison, $850 million from Sequoia Capital, $500 million from Binance and $400 million from Andreessen Horowitz.
Bitcoin cratered as much as 10% on Thursday to below $36,000, adding more fuel to the fire that the cryptocurrency is highly correlated to risk-assets like tech stocks, and that it’s not the hedge against rising inflation many investors thought it was.
Oil prices surged after OPEC+ maintained its gradual pace of output increases. West Texas Intermediate crude oil jumped as much as much as 3.08% to $111.13 per barrel. Brent crude, oil’s international benchmark, rose as much as 3.28% to $113.75.
Bitcoin fell 9.5% to $35,998. Ether prices fell 7.26% to $2,727.
Gold jumped as much as 1.93% to $1,904.80 per ounce. The yield on the 10-year Treasury added nine basis points to 3.05%.