Investors continued to avoid stocks amid concerns about an inflation-driven slowdown in global growth
Energy stocks fell more than 7%, pressured by a stronger US Dollar and the drastic drop in Oil and Natural Gas, which fell 7% and 12%, respectively, amid renewed fears about weakening demand from China. Shanghai has reportedly stepped-up lockdown measures over the pandemic.
China's recent lockdowns are expected to slow down the growth of the world's second-largest economy. This adds to fears of a significant slowdown in the global economy when central banks tighten monetary policy to control inflation.
Meanwhile, tech stocks were similarly affected, with Meta Platform down more than 3%. In comparison, Amazon fell more than 5%, as investors seem wary of a market recovery from these relatively low valuation levels. Treasury bond yields are taking a hiatus from highs, with the 10-year bond yield falling ten bps yesterday.
This sell-off across virtually all assets also caught up with crypto-related stocks, including Coinbase, and Riot Blockchain, which lost around 20% after Bitcoin fell to its lowest level since June.
In a clear sign of negative sentiment on Wall Street, consumer staples, which are seen as defensive in crisis scenarios, were the only positive sector.
The market begins to show signs of capitulation and closing of long positions by institutional investors in practically all risk assets, from stock markets to cryptocurrencies, including Gold, the US Dollar, and even Oil.
In oil’s case, in addition to forecasts hinting at a drop in demand by the world's leading oil consumer, China, the black gold was pressured downwards by increased expectations of Iran's reincorporation into the export market and by the announcement of the Saudi Aramco company to lower the price of a barrel to Western European countries. Should both natural gas and oil prices continue to fall, it could help alleviate inflationary pressure.
Sources: Bloomberg.com, reuters.com
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