The falls were led by Amazon, which slumped after publishing worse-than-expected first-quarter results, and by the biggest monthly inflation increase since 2005, and the rises in interest rates that picked up in anticipation of this week's Fed meeting.
Amazon plunged 14.05% in its steepest one-day drop since 2006, sending shares near two-year lows.
Apple, the world's largest company by capitalization, fell 3.66% after presenting gloomy expectations that overshadowed record quarterly results.
The S&P 500 posted its biggest one-day drop since June 2020. Nasdaq's decrease was the biggest since September 2020.
Corporate results released by Big Tech have not been negative. Still, guidance for the near future has been less promising due to supply problems and concerns about Fed’s aggressive monetary policy tightening.
Adding to fears on Wall Street, data showed the personal consumption expenditures price index, the Fed's favorite measure of inflation, soared 0.9% in March. It rose 0.5% in February. The Fed will meet on Wednesday, and the market is pricing in a 50-basis point interest rate hike to combat rising inflation.
The Nasdaq lost about 13% in April, its worst monthly performance since the 2008 global financial crisis.
The month ended on a very deteriorated risk sentiment, and the gloomiest forecasts prevailed in the market with many analysts beginning to anticipate a period of recession. This would lead the stock markets to additional losses, entering a downward trend.
However, as indicated at the annual Berkshire Hathaway meeting this weekend, investors like Warren Buffet continue to see this situation as a buying opportunity in sectors with high growth potential.
Everything will depend on various factors:
- the Federal Reserve's response, which will probably be less aggressive in the face of a slowdown in the economy;
- the evolution of inflation, which will largely depend on the price of energy;
- on the development of the Ukraine war;
- and on a supply chain improvement, which is currently under question due to Chinese lockdowns.
The Nasdaq index closed just above the major support zone, around 12,860 points. A daily or weekly close below this zone would allow deeper losses to the 12,300 levels. If so, it would be considered the start of a bear market.
Sources: Bloomberg, Reuters