Stocks fell on Tuesday, deepening a losing streak that will see April be Wall Street’s worst month in two years.
The S&P 500 dropped 2.8%, bringing its monthly loss to 7.8%. The index is on track for its worst monthly decline since March 2020, when stocks fell 12.5% due to the spread of the coronavirus around the world, causing lockdowns and a halt in economic activity.
The steady fall — just six days of gains in April — came as investors faced a long list of fears: that the Federal Reserve might raise interest rates much faster than economists expected; that rising prices and wages could undermine corporate profits; and that the resumption of lockdowns in China could be another drag on the global economy.
Earlier this month, the International Monetary Fund projected that global growth would slow to 3.6 percent this year from 6.1 percent in 2021. This was before the new Covid outbreak in Beijing raised concerns about new restrictions in China, the world’s second-largest economy, where cities like Shanghai have been closed for weeks.
“China will slow down the rest of the world if it shuts down,” said Victoria Green, chief investment officer at consulting firm G Squared Private Wealth. “If China shuts down, that could stop trade and that would slow down overall global demand.”
Technology stocks fell on Wall Street on Tuesday ahead of earnings reports from Alphabet, Microsoft and later this week from Meta, Amazon and Apple. Shares of all five major technology companies fell. The Nasdaq Composite Index, which is heavily tech-focused, fell about 4 percent.
Also lower were Tesla shares, which fell more than 12 percent. CEO Elon Musk may have to sell most of his shares in the automaker to fund the takeover of Twitter. He promised $21 billion cash as part of the transaction, in addition to loans. Tesla shares are often more volatile than other major stocks and can put pressure on the broader S&P 500 when they drop on the company’s huge valuation.
Among the worst performers in the S&P 500 was General Electric, which tumbled 10.3% after saying its full-year guidance was “leaning toward the lower bound” of its previous earnings outlook and listing nearly all of Wall Street’s concerns as a factor. .
“We are under increasing pressure from inflation, renewables and the Russian-Ukrainian war,” CEO H. Lawrence Culp Jr. said in a conference call with investors on Tuesday, explaining the outlook. “We are also keeping an eye on emerging areas, namely additional pressure in the supply chain and the recent impact of Covid in China.”
Fears of a slowdown in economic growth in the United States and abroad weighed heavily on the minds of investors throughout the month. Companies and consumers have already incurred higher spending on goods and transport, with inflation reaching 8.5% during the year to March.
Russian-Ukrainian War and the World Economy
But the conflict in Ukraine and shutdowns in China also caused volatility in energy markets, with crude oil rising in early March and then falling slightly in April. This has spread to the stock market as well.
“The pendulum went back and forth,” said Miss Green. “We’re going from oil prices being too high to seeing oil prices drop because we don’t have the demand we expected to see.”
Futures for Brent crude, the international standard, rose about 2.5 percent on Tuesday to about $105 a barrel. West Texas Intermediate, the benchmark of U.S. crude, for June delivery rose 3.2 percent to $101.70 a barrel.
Investors also disagree with the Fed’s approach to raising interest rates in the coming months in an attempt to bring down inflation. Although Wall Street has already raised rates several times this year, Fed officials have taken a more aggressive tone this month, saying they are ready to raise rates quickly to try to stop inflation and analysts are worried that the central bank could flip the economy. into a recession.
“The only way to cool inflation is to destroy demand and increase unemployment,” said Jean Boivin, head of the BlackRock investment institute. “It won’t be as easy as raising rates as the markets expect.”