Investors fled US equities, selling huge technology firms and pushing the technology-heavy Nasdaq Composite Index significantly down. In New York, the Nasdaq fell 1.9 percent as a mixed US employment data was seen as opening the way for a more aggressive fiscal policy, which would result in stricter financial conditions and drag on corporate values.
Etsy, Adobe, as well as Tesla all, fell more than 5% on the day. Facebook lost 1.1 percent during the day and has now fallen more than 20% from its September intraday high. The blue-chip S&P 500 index fell 0.8%.
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What Does This Mean?
The significant declines capped a tumultuous fortnight of trading characterized by wide price fluctuations across asset classes.
"I think investors are now anticipating a more hawkish monetary policy, which traditionally has placed negative pressure on technology equities," said Kristina Hooper, Invesco's chief global market strategist. The actions come after the Bureau of Labor Statistics reported that the US economy generated only 210,000 new jobs last month, much less than the 550,000 experts anticipated in a Refinitiv survey.
While the economy created fewer jobs last month than projected, the unemployment rate remained at its lowest point since the epidemic started. "This was not a poor employment report," Hooper said.
For investors, the data suggests that monetary policy tightening might accelerate. Federal Reserve Chairman Jay Powell expressed Tuesday his support for a faster wind-down of the central bank's monthly asset purchases of $120 billion. The program has been a critical component of the recovery in equity prices that has occurred ever since the depths of last year's coronavirus catastrophe.
The Purpose of This Movement
Contributing to the whipsaw fluctuations across equity markets is fund managers' desire to book gains going towards the ending of the year to avoid being hit by the change in attitude.
"The idea of a Fed that abruptly switched from friend to foe is leading some traders to believe it's prudent to cash out and spend weekends deliberating on future rate courses," stated Max Gokhman, investment manager at AlphaTrAI.
By the conclusion of the New York trade, the premium on the 10-year US Treasury note had fallen 0.09 percentage points to 1.36 percent. Bond prices move in the opposite direction of their prices.
Investors have been weighing the prospect of a more aggressive Fed against growing indicators of global growth slowing and the possibility that the Omicron coronavirus type may derail the US economic growth. Germany has begun imposing social restrictions on unvaccinated individuals, while Joe Biden has proposed efforts to halt the spreading of coronavirus, including stricter US testing standards for overseas visitors.
The Stoxx Europe 600 index of leading shares sank 0.6 percent, after a 1.2 percent loss in the previous day. The FTSE 100 index in London fell by 0.1 percent. In Asia, the Hang Seng index in Hong Kong fell by around 0.1 percent.
Chinese firms listed in New York were also subjected to intense criticism on Friday after Didi Chuxing revealed intentions to delist from the NYSE and be ready to go public in Hong Kong. Didi's stock fell more than 20% during US trading hours. Alibaba, JD.com, Baidu, as well as Pinduoduo all, plummeted roughly 8%.
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