IVAYLO ANDONOV, Director of Investment Center ELANA Plovdiv. The author has over 20 years of investment and capital markets experience
Last week was marked by a massive sale of stocks on the capital markets. The main reason for the red wave that swept Wall Street was the rise in inflation overseas. US inflation data for August showed a across-the-board increase, contrary to most analysts’ forecasts. This
disappointed the hopes of investors,
that the Federal Reserve can backtrack and ease its tightening policy in the coming months. Concerns have increased that a prolonged period of Fed policy tightening could push the US economy to the brink of recession. After the inflation report was released on Tuesday, all three major US equity indices plummeted. The indices recorded their largest one-day percentage drops since June 2020, the time of the COVID-19 pandemic. On the day alone, the blue-chip Dow Jones Industrial Average fell 1,270 points, or 3.9%, the largest drop since the beginning of the year. The large S&P 500 fell 4.3% and the tech-rich Nasdaq Composite closed 5.1% in the red. For the week, the total loss for the Dow Jones was 4.7%, while the decline for the S&P 500 and Nasdaq was 3.8% and 6.2%, respectively.
Risk aversion by traders
submerged the most sensitive sector – that of technology,
deep into negative territory. Led by major weight companies Apple Inc (- 4.3%), Microsoft Corp (- 7.4%) and Amazon.com Inc. (- 7.3%) it hit tech Nasdaq hardest. Facebook’s parent company Meta Platforms posted a 13.5% decline and chip giant Nvidia 8.2%. Advanced Micro Devices Inc. closed with a weekly loss of 10.4%.
Shares in software giant Adobe also weighed on the Nasdaq and S&P 500 after falling more than 23%. This happened after the company announced a $ 20 billion deal to acquire Figma. Figma is a startup that develops online tools for project collaboration
After shipping leader FedEx Corp said its fiscal results this year were hit by declining global volumes and withdrew its financial forecast for next year 2023, its market capitalization plummeted by 24%. FedEx also warned its shareholders that management expects a further deterioration in trading conditions. FedEx’s warning drove the shares of rivals United Parcel Service (UPS) and XPO Logistics by 4% and 7%, respectively.
Spot gold prices lost around 3% over the five trading sessions, ending at around $ 1,659.30 per ounce. This is the lowest level since April 2020. Analysts warned of further losses after the precious metal dipped below $ 1,700, a key support level. Gold fell from its highs during the start of the Russia-Ukraine conflict as, following a series of Fed interest rate hikes, investors switched to
looking for better dollar and government bond yields.
Futures on both types of oil recorded a third consecutive week of losses. Primarily, the concern is that an aggressive tightening of monetary policy will affect global growth and thereby reduce the demand for black gold. The crude oil market was also hit by the strong US dollar, making oil more expensive for buyers using other currencies. However, the declines were limited by news that the White House was preparing to replenish its strategic oil supply at a price of $ 80 a barrel. US reserves are currently at their lowest levels since 1981. At the close of the session on Friday, a barrel of US light WTI was trading at a price of $ 85.3. The world benchmark Brent closed at $ 91.5 a barrel.
* The material is informative and should not be considered an offer to buy or sell financial instruments. Both the author and the clients of the company he works for may own one and / or more titles discussed.
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