Dow drops 500 points as investors

New York
CNN Business

US markets plunged on Tuesday.

The Dow fell about 580 points, or 1.7% in the early afternoon as a selloff in April spurred by fears of an economic slowdown continued after the short-lived rally of Monday.

Losses are led by mega-cap tech stocks as investors await major corporate earnings reports this week. First-quarter results from Microsoft and Google’s parent company Alphabet will be released after today’s closing bell.

The tech-heavy Nasdaq fell about 2.6%, retreating further into bearish territory, and the S&P fell 1.6%.

After Federal Reserve Chairman Jerome Powell indicated last Friday that there are likely to be aggressive interest rate hikes next month, the Dow fell about 980 points, or 2.8% . The rate increases are aimed at stifling runaway inflation, but investors are more concerned that a spike in interest rates will slow consumer spending and the housing market, heralding the next recession.

Fast-growing tech stocks are closely tied to Federal Reserve decisions. These rate-sensitive companies have high price-earnings ratios because they are typically valued on future earnings and pay no dividends. Higher rates mean future income will be worth less than it is today.

Cyclical stocks also fell on Tuesday. The Dow 3M component fell nearly 3%, as did UPS shares, even as both companies beat earnings expectations.

General Electric fell more than 11% after warning that its outlook for 2022 was “tending to the lower end of the range”.

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

Investors also remain worried about the geopolitical turbulence linked to the Russian invasion of Ukraine. A senior Russian official said on Tuesday that the threat of nuclear war was real.

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


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