Better-than-expected US economic data on Thursday raised the likelihood that the Fed would continue to raise interest rates aggressively, a brutal trading day for investors.
Technology stocks are on the verge of their worst December since the dotcom bubble burst 20 years ago, as optimism about a possible slowdown in the Fed's rate hike is fading.
The number of first-time claims for unemployment benefits rose 2000 to 216000 in the week to December 17 from a month earlier, still near an all-time low, reflecting strong reasons for the Fed to continue to tighten policy, according to data released by the Labor Department on Thursday. Meanwhile, the Fed's favorite indicator of inflation, the core PCE price index, rose 4.7% in the third quarter from the previous quarter, the second consecutive quarterly slowdown.
Subsequently, the Nasdaq 100 index fell 2.5%. It was a brutal trading day for investors who were bullish on the stock market-their concerns about the potential risk of recession were rekindled.
The Nasdaq 100th index of technology stocks such as Apple Inc and Microsoft Corp has fallen 8.93 per cent this month, surpassing its November rise, when the market hoped that cooling inflation would lay the groundwork for the Fed to further slow the pace of interest rate hikes and possibly suspend them next year.The decline is also close to the monthly decline of the benchmark index in December 2002, when the Nasdaq 100 index fell 12%.
In addition, U. S. semiconductor giant Micron Technology Inc announced results for the first quarter of fiscal 2023, which ended December 1, after U. S. stocks opened on Wednesday. The company's key financial indicators and guidance for the next quarter fell short of market expectations, according to the results. Micron Technology Inc's shares then fell about 2.1 per cent in after-hours trading.
Joe Gilbert, a portfolio manager at Integrity Asset Management, told the media that the economic data were better than the market expected, so now the market has to face the fact that the Fed may continue to raise interest rates aggressively. In addition, earnings reports from cyclical companies show that the outlook for the future is weakening sharply and the possibility of the Fed's policy mistakes is increasing, heralding a risk-averse market.
The worst performers in the Nasdaq index this month were Tesla, Inc., chipmaker Marvell Technology and AMD.Tesla, Inc. 's shares fell more than 30 per cent as investors worried about falling demand for its electric cars and chief executive Musk was distracted by Twitter. Shares of Mei Man Electronics and AMD fell about 20 per cent.
Almost all components of the Nasdaq 100 index fell on Thursday, with trading volume up 14% from the 30-day average. Of these, more than 10 per cent of the 100 stocks fell to 52-week lows, including Amazon.Com Inc, Airbnb, PayPal Holdings Inc and Zoom. Meanwhile, the CBOE NDX volatility index, which measures volatility in technology stocks, rebounded from its lowest level since early December.
Edit / lydia