In a tumultuous trading session on Thursday, the stock market witnessed significant losses in stocks as investors grappled with the repercussions of underwhelming earnings reports from Big Tech companies and escalating bond yields. The Nasdaq, heavily reliant on tech giants, bore the brunt of the downturn, tumbling 1.8%, while the S&P 500 endured a 1.2% drop, teetering dangerously close to correction territory. The Dow Jones Industrial Average wasn’t spared either, dipping 0.8% or more than 250 points.
The tech sector remained under severe pressure following a nightmarish performance on Wednesday, marking its worst single-day decline in eight months. Apprehensions are mounting that valuations have reached unsustainable levels, particularly in the context of surging Treasury yields. Thursday saw the benchmark 10-year yield retract by 11 basis points, trading near 4.85%, responding to the latest Gross Domestic Product (GDP) figures that revealed the US economy’s robust growth, its swiftest in almost two years. The Bureau of Economic Analysis’ advance estimate of third-quarter US GDP displayed a remarkable annualized growth rate of 4.9%.
Despite the Federal Reserve’s persistent assertion of “higher-for-longer” interest rates, which has thus far failed to deter the American consumer, other central banks worldwide are cautiously shifting their monetary policies. The European Central Bank, in a noteworthy move, maintained its interest rates steady for the first time in over a year, following a streak of 10 consecutive rate hikes, and reasserted its commitment to a consistent policy in the near future.
Notably, these substantial stock market losses occurred against a backdrop of encouraging economic news, indicating remarkable strides in the US economy. However, investors remain preoccupied with the ramifications of elevated valuations and the relentless surge in US bond yields, which have left equities entrenched in a downward spiral.
The financial world’s gaze now turns to the upcoming Federal Reserve interest rate decision slated for November 1st. This pivotal event is anticipated to offer more clarity on the trajectory of the economy and the potential depth of the ongoing stock market correction.
To summarize, Thursday was another challenging day for stocks, plagued by the aftermath of Big Tech earnings disappointments and the relentless rise in bond yields. Although the robust US economic data provided some respite, investors grapple with the formidable task of navigating the implications of the pause in interest rate hikes and the precarious valuation levels prevalent in the US markets.
Source: Yahoo Finance
