Market Turmoil: Wall Street Faces Significant Declines
NEW YORK (AP) — Wall Street experienced sharp declines as technology stocks faced further setbacks, and the price of bitcoin plummeted, nearing half its peak reached last fall. Dismal reports concerning the U.S. job market exacerbated the situation on Thursday, resulting in a decrease in bond yields.
The S&P 500 index fell by 1.2%, marking its sixth decline in the past seven days since reaching an all-time high. Similarly, the Dow Jones Industrial Average also dropped 1.2%, whereas the Nasdaq composite saw a decline of 1.6%.
Bitcoin fell below $65,000, and prices for gold and silver resumed their rapid downward trajectory, mirroring declines across stock indexes in Europe and Asia.
THIS IS A BREAKING NEWS UPDATE. Further details from AP follow below.
Technology Sector Struggles Amid Job Market Woes
More losses in technology stocks are dragging the U.S. market lower on Thursday, coupled with bitcoin’s price decline, nearly halving from its record established last fall. Yields in the bond market have also decreased following discouraging news regarding the U.S. job market.
The S&P 500 plummeted 1.1%, inching towards its sixth loss over the last seven days since its historic peak. As of 2:45 p.m. Eastern time, the Dow Jones Industrial Average was down 483 points, equal to a 1% loss, while the Nasdaq composite fell 1.3%.
Alphabet’s Performance Raises Concerns
Alphabet contributed to the market’s downturn, witnessing a 1.4% decline despite the parent company of Google and YouTube reporting stronger-than-expected quarterly profits.
Investors, however, are fixated on Alphabet’s escalating expenditures on artificial intelligence technologies, raising questions about the potential long-term viability of such investments.
The technology giant disclosed that its expenditure on equipment and other investments could double this year to approximately $180 billion, significantly surpassing analysts’ expectations of below $119 billion, according to FactSet.
Bond Market Reaction to Jobless Claims
In the bond market, Treasury yields experienced a sharp drop after a report indicated a surge in U.S. workers applying for unemployment benefits, exceeding economists’ forecasts. This could signal an acceleration in layoffs, raising concerns among investors.
While some economists suggested that the rise in claims could represent statistical anomalies, the overall figures remain relatively low in the historical context.
In contrast, a separate report indicated that layoffs announced by U.S.-based employers surged to 108,435 last month, the highest monthly figure since October, as per the global outplacement firm Challenger, Gray & Christmas.
This marks the most substantial increase for January since 2009.
Additionally, a third report from the U.S. government revealed that employers were advertising the fewest number of job openings in December in over five years.
Continued weakness in the job market may compel the Federal Reserve to consider reducing interest rates to bolster the economy, albeit at the risk of further intensifying inflationary pressures. The resultant drop in Treasury yields was noticeable across the board.
The yield on the 10-year Treasury fell to 4.20% from 4.29% late Wednesday, a significant movement in the bond market.
Commodities Market Experiences Turbulence
The commodities market witnessed even sharper declines.
Silver prices dropped by 9.1%, reflecting the ongoing volatility after a surge last week.
Gold also fell 1.2%, settling at $4,889.50 per ounce. Its price trajectory has been erratic, having roughly doubled over the past year, approaching $5,600 last week before plummeting to below $4,500 on Monday.
Both gold and silver previously soared as investors sought refuge amid concerns over political instability, a stock market perceived as expensive, and the mounting debt burden of governments worldwide. Nevertheless, unsustainable price appreciation ultimately necessitated a correction, which some analysts had anticipated.
Bitcoin, dubbed “digital gold,” similarly tumbled, nearing $65,000, a marked decline from its record high of over $124,000 reached in October.
Impact on Crypto and Tech Stocks
The falling prices have adversely impacted stocks tied to the cryptocurrency sector. Coinbase Global, the cryptocurrency trading platform, saw its shares plunge by 10.5%, while Strategy, specializing in bitcoin investments, dropped 14.5%.
In the broader technology sector, Qualcomm experienced an 8% decline, despite exceeding analysts’ expectations for profit and revenue last quarter. However, the company’s profit forecast for the upcoming quarter fell short as industry-wide memory shortages prompted handset manufacturers to reduce orders.
Similarly, Estee Lauder surpassed Wall Street forecasts and raised its financial outlook for the fiscal year. Nevertheless, disappointment over expectations led to a 21.3% decline in the company’s shares during tumultuous trading.
Companies Thriving Amid Adversity
Conversely, certain companies stood to gain from heightened expenditures associated with Alphabet and the ongoing AI frenzy. Chip manufacturer Broadcom rose by 1.8%, serving as a mitigating force against the S&P 500’s losses.
McKesson recorded an impressive 18.1% increase, the largest gain in the S&P 500, after announcing stronger-than-expected profits and revenues. The healthcare company’s revised profit forecast further bolstered investor confidence.
Global Market Reactions
Internationally, stock indexes across much of Europe and Asia also fell.
London’s FTSE 100 decreased by 0.9% following the Bank of England’s decision to maintain interest rates. France’s CAC 40 fell by 0.3%, while Germany’s DAX dropped 0.5% after the European Central Bank likewise decided to hold rates steady.
South Korea’s Kospi tumbled 3.9%, marking one of the most significant declines globally and retreating from its all-time high. Samsung Electronics suffered a 5.8% drop, only two days after experiencing an 11.4% surge.
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