The main Wall Street indexes ended Friday’s trading session with sharp decreases amid worries that global economic growth may slow down, following the cautious forecasts by the US Federal Reserve, as well as the weak data on the European economy.
The blue-chip index Dow Jones Industrial Average wiped out 460.19 points of its value to 25,502.32 points with a sharp decline in bank stocks due to the reversed yield curve that some investors see as a signal of an impending recession. The broader S&P 500 dropped by 1.9% to a level of 2,800.71 points, which is the largest daily decrease since January 3. The technology index Nasdaq Composite wiped out 2.5% and ended at 7,642.67 points on the background of bad performance of the stocks of Facebook, Amazon, Netflix, Alphabet and Apple.
Despite the big sellout on Friday, the Wall Street indexes are still sharply up since the beginning of the year. S&P 500 and Nasdaq increased by 11.7% and 15.2%, respectively. At the same time, Dow added 9.2% to its value.
The fear of recession is getting bigger. The spread between the yields on 3-month and 10-year US government bonds became negative for the first time since 2007, reversing the so-called yield curve. The reversal curve occurs when the yield on short-term bonds exceeds that of long-term bonds. This is considered by investors as a reliable indicator of a forthcoming recession in the near future.
The fears of the markets were refuelled by the worse-than-expected economic data in Europe. IHS Markit reported that industrial output in Germany has reached its lowest level in more than six years. In France, the industrial production and services have slowed down to their lowest level in three and two months respectively. For the Eurozone as a whole, the industrial output has fallen to its lowest level since April 2013. The data has sent yields on 10-year German securities to its lowest level since 2016, and for a while, it has been on negative territory.
At the same time, the United States reported its biggest monthly budget deficit in February amid a 20% decline in corporate tax revenues and a rise in spending. The budget gap has risen to 234 billion USD in the second month of the year, significantly higher than last year’s 215.2 billion USD. The deficit outpaces the previous record of 231.7 billion USD, seven years ago.
Corporate stocks performance
The bank stocks were performing worst. Citigroup’s stock price dropped by more than 4% and Goldman Sachs, Morgan Stanley, J.P. Morgan Chase and Bank of America wiped out at least 2.9% of their value.
The stocks of Nike also put pressure on the indexes, declining by 6.1% due to the weak quarterly growth in North America.
The stocks of aircraft manufacturer Boeing depreciated by 2.8% after Indonesian airline Garuda cancelled an order for 49 Boeing 737 Max worth 6 billion USD.
The technology giants FAANG (Facebook, Apple, Amazon, Netflix and Google) were among the worst performers during the session. The stocks of Facebook wiped out 1.05%, while Apple was down by 2.07% and Amazon dipped even 3.0%. Google and Netflix were also deep into the red, decreasing by 2.3% and 4.5%, respectively.