Dow overturns recession fears

The Dow index fell 810 points, or 2.4%, as a sell-off in April spurred by fears of an economic downturn continued after Monday’s brief recovery.
The losses were led by mega cap tech stocks as investors await key corporate earnings reports this week. Results for the first quarter from Microsoft (MSFT) and Google’s parent company Alphabet (GOOGL) released after the day’s closing clock.

The technology-heavy Nasdaq fell about 4% and retreated further into bear territory. It’s now a 22% discount at the high level, and it was a 52-week low on Tuesday. S&P fell by 2.8 per cent.

After Federal Reserve Chairman Jerome Powell last Friday indicated that there will likely be aggressive rate hikes next month, the Dow index fell around 980 points, or 2.8%. The rate hikes are intended to dampen runaway inflation, but investors are more worried that a rise in interest rates will slow down consumer consumption and the housing market, heralding the next recession.

The Dow is down nearly 1,000 points due to fears of interest rate hikes and poor earnings from Verizon

Rapidly growing technology stocks are closely linked to Federal Reserve decisions. These price-sensitive companies have high price-to-earnings ratios because they are typically valued at future profits and do not pay dividends. Higher rates mean that future earnings will be worth less than they are today.

The cyclical shares also fell on Tuesday. Dow component 3M fell nearly 3% and UPS shares fell more than 3%, even though both companies beat earnings expectations.

General Electric plunged nearly 10% after warning that its outlook for 2022 was “trending towards the low end of the range.”

Asian markets also withdrew on Tuesday as economic closures in China, triggered by the country’s zero-Covid policy, disrupted global supply chains. China is a major customer in the US technology and semiconductor market.

Investors also remain concerned about the geopolitical unrest associated with Russia’s invasion of Ukraine. A Russian top official said on Tuesday that the threat of nuclear war is real.

The CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, plunged deeper into a state of fear on Tuesday.

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