U.S. stocks dropped sharply on Wednesday as a massive selloff in the biggest tech stocks has driven markets this year.
The Dow plunged 831 points, losing 3.15 percent of its value. It was the second-biggest drop of the year for the Dow, which on Feb. 5 lost over 1,100 points in a single trading session.
A particularly sharp decline was observed in the high-tech sector:
Amazon’s paper fell by 6.2%
Apple — by 4.63%
Netflix — by 8.4%
Facebook — by 4.1%
Alphabet — by 4.6%
Microsoft-by 5.4%.
Brad McMillan, chief investment officer at Commonwealth Financial Network, characterized the market’s decline as “normal volatility” and said stocks were “past due for a pullback.”
What caused the fall?
Nervousness had been building for days on Wall Street and here are some facts which caused the panic:
----US markets have a trade war edge over China, which is compounded by Hacked Supermicro Hardware Scandal — A major U.S. telecommunications company discovered manipulated hardware from Super Micro Computer Inc. in its network and removed it in August, fresh evidence of tampering in China of critical technology components bound for the U.S., according to a security expert working for the telecom company.
----The Impact of a FED Interest Rate Hike — The Fed has raised interest rates three times this year and is largely expected to hike once more before year-end.
----China holds $1.17 trillion of U.S. government debt- As the United States and China inch closer to a full-fledged trade war, economists and investors worry about worst-case scenarios that could impact the global economy — and America.
“We don’t know who is to blame here; it’s a little like trying to find what or who is responsible for the dangerous hurricane in Florida today,” says Chris Rupkey, chief financial economist at MUFG, Tokyo-based global bank with offices in New York. “But make no mistake about it, the stock market decline, triggered perhaps by rising bond yields, is just as dangerous.”
HyperQuant vision
1. A sea of red washed over not only Wall Street but Cryptocurrency market
No news.. no FUD... but the entire market just literally goes down 5–15% for what seems no reason.. why does this happen? — many people around the internet keep asking this interesting question.
Bitcoin, Ethereum and other major cryptocurrencies have experienced a sudden drop in price, knocking billions of dollars off their value in the space of just a few minutes.
Hyperquant experts think that the US stock market and Crypto market are correlated.
Interest for cryptocurrencies is decreasing. Just look google trends. Lots of good news and stuff that should’ve pumped interest for cryptos in the last 6 months, yet it didn’t move it a bit. Right now there are no much crypto-trends and ideas that many people believe in. The market is open to entirely new ideas and all blockchain enthusiasts are waiting for a innovative growth boom, said Pavel Pavchenko, CEO of HyperQuant project.
We need to be realistic and be aware that most of the money in crypto is people’s “play money” and they will need it back if we get another recession/depression, that caused major recent crypto decline.
2. Trump calls stock sell-off ‘a correction… maybe he is right.
In order to make a rational decision, we have to look at the behavior of the stock market today during first buys. If the market face buys backs there is a chance that we will avoid further decline. If not, we may expect the long-term fall.
“Actually, it’s a correction that we’ve been waiting for a long time” Trump told reporters before a political rally in Pennsylvania.
3. Fed has gone crazy
Stock market sell-off won’t stop the Fed from hiking rates. Many people say that Fed purposely increased the rates in order to affect the market situation, but in reality, when the Fed raises interest rates, it is trying to increase borrowing costs for businesses and consumers to help keep the economy from overheating.
After some time, Fed will evaluate how their decisions have affected the market and the economy in general.