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Technology and banking stocks lower the US stock markets

Technology and banking stocks lower the US stock markets
Technology and banking stocks lower the US stock markets

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All the leading US stock market indices fell significantly on Wednesday evening, following the interest rate decision from the US central bank – the Federal Reserve. On Thursday, the stock markets continued to fall.

Gloomy from US central bank chief Jerome Powell. (Photo: Jacquelyn Martin/AP/NTB)

Higher interest rates mean that the risk capital has almost completely disappeared, which particularly affects the technology companies, where more critical questions are now being asked about the valuation of many of these companies. On Thursday, banking and financial shares also fell markedly, among other things on fears of loan losses and investment banking on expectations of less activity in areas such as asset management, brokerage, mergers and acquisitions.

At closing time, the three benchmark indices looked like this on Wall Street:

  • Industry-heavy Dow Jones was down 0.36 percent
  • The broad S&P 500 index was down 0.85 percent
  • The technology-heavy Nasdaq was down 1.37 percent

Tesla fell over four percent after news of a massive recall of cars in the US.

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Downward spiral

From mid-August alone, all three leading US stock market indices Dow Jones, S&P 500 and Nasdaq have fallen well over ten percent, and they are approaching the bottom levels from June this year. The worst thing has happened to the technology shares on the Nasdaq, which are down almost 15 per cent since mid-August.

The US stock markets have now fallen seven of the last nine trading days.

Higher interest rates, inflation and market unrest linked to energy prices and the geopolitical mood weigh on the markets and make investors nervous.

The message from Fed chief Powell on Wednesday evening was also not to be misunderstood. He predicted a winter of war and sharply raised the interest rate path for 2022 and 2023, to around 4.6 per cent at the end of next year. The policy rate is after Wednesday’s triple increase of 3.25 per cent, up from a record low of 0.25 per cent just a few months ago.

Anders Johansen, chief strategist at Danske Bank, is among many economists who now believe that the US is on the brink of a recession, i.e. that the economy is shrinking.

“The Fed is planning a hard landing – a soft landing is almost impossible. Powell’s admission that the economy’s growth will be lower than the trend for a period should be translated into the central bank advocating a recession. It will be tougher times from here on,” writes chief strategist at Principal Global Investors, Seema Shah, according to Bloomberg, in a note reproduced by TDN Direkt.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links, which lead directly to our pages. Copying or other forms of use of all or part of the content may only take place with written permission or as permitted by law. For further terms see here.

The article is in Norwegian

Tags: Technology banking stocks stock markets

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