Market check: Stock sell-off accelerates as traders weigh Fed policy

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Yahoo Finance Live’s Akiko Fujita and Brian Cheung discuss the stock market sell-off as traders digest the Fed’s 50 basis point rate hike.

Video Transcript


BRIAN CHEUNG: Welcome back to Yahoo Finance. Well, just in the last few minutes, the Dow Jones actually tilted below a 1,000 point loss day. And it’s accelerating fast. We’re actually down over 1,100 points as of right now. As far as percentage goes, that’s about 3.25%. The NASDAQ composite– take a look at this– tech stocks getting a much bigger hit today, down 5%. And the S&P 500 down 3.7%.

But again, what makes all this market action so remarkable is that it is completely reversing the massive gains that we saw after the announcement from the Fed at 2:00 PM yesterday. You can see the big spike up, and then I’ll change this to red, the big spike down. You might want to call this a dramatic round trip formation, perhaps.

But look, an ugly day across the board, Akiko.

AKIKO FUJITA: Well, and I wonder if we can pull up the tech stock again, or tech names again. Because we’ve seen a significant sell-off in there. Today the story is about the e-commerce players and how we have seen a big pullback from the pandemic on the back of that. We were talking about eBay, as well as Etsy earlier.

But I mean, in many ways. Brian, this kind of points to the narrative that we’ve been hearing, right. As we see the Fed move towards higher rates, these high growth companies that are heavily indebted, they’re looking at a bigger loss.

BRIAN CHEUNG: Yeah, and I think that we need to take the picture kind of in whole here. I mean, this is a one-day move that we’re seeing, right? 7% down on Tesla, 7% on Amazon. These are major drivers of the broad markets. That’s the reason why the larger indexes are also declining.

But look, take a picture of this in your head mentally. And then let me show you what this looks like over a one-month period. It’s still red across the board. I’ll show you over a three-month period. Still red across the board. Now not as bad, some stocks have had it certainly worse than others, Amazon there’s a growth story for them that’s deflated a bit since the past few earnings reports. Google, down 19%. But the picture overall has shown you that the tech stocks have had a tough time through what is the macro story of the Federal Reserve raising rates.

Now the mechanism for that is not as direct. It’s not like, well, 0.5% higher borrowing costs means that they can’t finance their debt as easily. The bigger story is that the overall market, with regards to the Federal Reserve acknowledging these recession risks, is going to take some steam out of the consumers, which every single one of those companies is exposed to.

AKIKO FUJITA: I mean, there is an argument to be said, that a lot of this is overdone. But, but there’s definitely a re-rating that’s happening around the high growth names, especially those that have seen huge gains on the back of the pandemic over the last few years. I mean, you look at a name like Apple. You were just pointing out the declines today. That’s not news of Apple. I mean, this is just sort of the broader sell-off that we’re seeing.

Obviously, we saw the earnings last week. There were concerns about price pressures. But the fundamental story for Apple is still very much intact. And yet we are seeing names like an Apple, a Microsoft, down 9% today, on the back of the broader macro picture pulling back.

BRIAN CHEUNG: Yeah. And I think, too, though, we’re talking so much about the tech stocks, but we have to remember that not all sectors are created equal. When you look at the three-month period, which we were just showing you, there are clear winners, right. Take a look at energy. And that makes sense. Because the price of oil, I mean, if you’re in the commodity space, it’s looking very good for you over the last three month period. But look, XLC, communication also taking a massive hit.

So even though we’re talking a lot about what people consider to be the big blue chip, sexy names, like Tesla, like Apple, I mean, look there are a number of other sectors that have had it much better, but also had it much worse during this macro story that we’ve been talking about.

AKIKO FUJITA: But we mention the tech names because they’re so heavily weighted, right?

BRIAN CHEUNG: Well, they’re so important, yeah.

AKIKO FUJITA: That’s why. I mean, energy obviously one that we saw, especially on the back of earnings, too, just seeing record profits for these companies because of where energy or oil has been trading.

That does it for Brian and I on this Thursday. We’re going to be right back here again tomorrow.