Wall Street sells off as Nasdaq confirms correction

It’s a sea of red on Wall Street, as its main indexes ended sharply lower on Wednesday, with the tech-heavy Nasdaq confirming it was in a correction, after a diverse set of corporate earnings. Also, investors continue to worry about higher U.S. Treasury yields and the Federal Reserve tightening monetary policy.

A correction is confirmed when an index closes 10% or more below its record closing level. The Nasdaq confirmed this as it is down 10.7% from its November 19 closing record high, as stocks sold off into the market close.

The Nasdaq’s last correction was in early 2021 when the tech-heavy index fell more than 10% from February 12th high to March 8. It was the fourth time in the two years since the coronavirus pandemic shook global markets that the index has found itself in a correction.

What you should know

A major reason for Wednesday’s selloff is the decline of Apple shares by 2.1%, which weighed most on the Nasdaq. Also, declines from Tesla and Amazon also dragged on the index southward.

Stocks, as well as the cryptocurrency market, have gotten off to a rocky start in 2022, as a fast rise in Treasury yields amid concerns the Fed will become aggressive in controlling inflation has particularly hit tech and growth shares. The benchmark S&P 500 is down approximately 5% so far this year.

Yesterday, the Dow Jones Industrial Average lost 0.96%, to close the trading session at 35,028.65 basis points, the S&P 500 lost 0.97%, to end the session at 4,532.76 basis points while the Nasdaq Composite also dropped 1.15%, to end the session at 14,340.26 basis points.

The week so far has not been too kind to Wall Street. Stocks fell aggressively on Tuesday, with the Nasdaq falling 2.6%, after weak results from Goldman Sachs and a spike in Treasury yields. However, U.S. Treasury yields eased on Wednesday from two-year highs.

In other company news, shares of Procter & Gamble (NYSE: PG) rose 3.4% after the consumer goods company bumped up its annual sales forecast. Bank of America Corp reported a better-than-expected 30% jump in quarterly profit, while Morgan Stanley also reported fourth-quarter profit which beat market expectations, following uneven results from other banks. Bank of America shares rose 0.4%, while Morgan Stanley shares gained 1.8%.

What they are saying

Kristina Hooper, chief global market strategist at Invesco stated, “Any beginning of tightening often results in significant volatility and I think there is always that risk that there is a policy error and it ends the economic cycle. So, we just have a lot of apprehension.”

Michael James, managing director of equity trading at Wedbush Securities in Los Angeles stated, “There’s a fair amount of anxiety in terms of how the next three to six months are going to play out with a rate-hike cycle set to start likely in March.”

Bottomline

Investors are looking to next week’s Fed policy meeting for more clarity on central bankers’ plans to rein in inflation. Data last week showed U.S. consumer prices increased solidly in December, culminating in the largest annual rise in inflation in nearly four decades. About 11.4 billion shares changed hands in U.S. exchanges, compared with the 10 billion daily average over the last 20 sessions.