US and European stocks fell on Monday as the outlook for major global economies darkened, with tech stocks hit hard by fears the Federal Reserve will take an aggressive stance during a central bank summit this week.
Wall Street’s tech-focused Nasdaq Composite gauge fell more than 2 percent, while streaming company Netflix fell more than 6 percent.
Amazon, Tesla and semiconductor giant Nvidia also lost about 3 percent, as concerns grew over higher interest rates decreasing the value of future cash flows and income.
“The Nasdaq is the epicenter of uncertainty about interest rates in the stock markets,” said Julian Howard, chief investment director at GAM. “[The Fed] talk about hawkishness, which makes the market quite nervous. The job isn’t done [on inflation].”
Wall Street’s broad S&P 500 index fell 1.6 percent late morning in New York, after a four-week winning streak on Friday.
Market movements in the US in recent weeks have been propelled by hedge funds taking bearish bets and warning traders on Monday that Friday’s recent expiration of a large block of options could increase volatility in the coming days, as it did at the beginning. this week.
In currencies, the euro fell nearly 1 percent against the dollar to $0.994, falling below $1 after reaching parity with the dollar for the first time in two decades in July. Concerns over possible cuts in Russia’s energy supply led to European gas and power prices rising on Monday, raising fears the continent could slide into recession.
The regional stock index Stoxx Europe 600 closed 1 percent lower, while the German Dax fell 2.3 percent.
The growing sense of economic gloom comes ahead of the Fed’s annual meeting in Jackson Hole, Wyoming, which the central bank often uses to make major policy announcements. Fed chief Jay Powell is expected to signal that the central bank will continue to raise interest rates aggressively in its battle against elevated inflation.
“I wouldn’t count on Powell giving a strong signal at Jackson Hole that he’s ready to change direction on inflation,” said Joost van Leenders, senior investment strategist at Van Lanschot Kempen. “[He will] justify why they are raising rates so quickly and why they should.”
Andrew Hollenhorst, economist at Citigroup, echoed that sentiment, saying, “We continue to expect a relatively aggressive speech from Chairman Powell in Jackson Hole on Friday.”
He noted that yields on US Treasuries and the dollar have both risen recently as investors move to expect more vigorous Fed tightening even after US inflation tapped slightly lower in July from June.
The policy-sensitive yield on two-year government bonds was 3.33 percent Monday, from about 2.5 percent at the end of May and less than 1 percent at the end of last year. Meanwhile, the dollar added 0.9 percent on Monday and is up nearly 3 percent this month against a basket of half a dozen major currencies, approaching the two-decade high it reached in July.
Shares in global developed markets had recovered strongly in July after a historic first-half loss and were still standing near Friday’s close in August. However, many investors have questioned the sustainability of the recent rally, given the strong economic headwinds expected for the remainder of this year and into 2023.
“I’m not participating in this relief rally. I think we will have more downside for the risk markets for the rest of the year,” said Jamie Niven, senior fund manager at Candriam.
Elsewhere, mainland China shares rose on Monday after the People’s Bank of China cut mortgage rates for the second time this year in a bid to support the debt-laden real estate sector. The CSI 300-meter of shares listed in Shanghai and Shenzhen closed 0.7 percent higher.
Additional reporting by Eric Platt in New York