The US stock markets experienced a significant downturn at Thursday's opening, causing concerns among investors. The decline was driven by fears of increasing interest rates following unexpectedly robust labor market data. The Dow Jones Index dropped 0.9% to 33,966 points in early trading, while the S&P 500 and Nasdaq Composite lost 1.0% and 1.2% respectively. Bond prices tumbled, resulting in a significant rise in market interest rates. The futures market now indicates a nearly 93% probability of another 25 basis points rate hike by the end of July. The ADP employment report revealed that the private sector created more than double the projected number of jobs in June, further fueling expectations for additional interest rate increases.
In addition to concerns about interest rates and the overall economy, investors are also troubled by escalating geopolitical tensions stemming from the ongoing trade dispute between Beijing and Washington. US Treasury Secretary Yellen's four-day visit to China offers a limited prospect of reconciliation between the US and China, with IG Markets warning of a potential escalation.
The US dollar has shown only moderate reaction to the rising interest rates so far, as the dollar index limited its decline to 0.2% after initially being down about 0.4% prior to the release of the ADP data.
Oil prices remained relatively unchanged, despite a significant decrease in US crude oil inventories during the previous week, as reported by the private American Petroleum Institute (API). Official data on oil reserves are expected later in the day.
Among individual stocks, Meta Platforms experienced a slight decline of 0.1% at $294.10 following the previous day's gains. Analyst Justin Patterson from Keybanc raised the target price to $335 from $280 and maintained an "Overweight" rating after Meta launched its new micro-blogging service, Threads, which aims to rival Twitter. Threads already attracted 5 million users within the first four hours of its launch.
JetBlue Airways shares declined by 2% as the airline abandoned its plans for a joint venture with American Airlines (-1.2%) due to an unfavorable court ruling, opting instead to focus on the $3.8 billion acquisition of Spirit Airlines (+2.0%).
VBI Vaccines saw a sharp decline of nearly 48% following a capital increase announcement, while Histogen experienced a 7% surge. The biotechnology company decided to temporarily pause its ongoing programs and explore strategic options.
Cryptocurrency markets also experienced a downturn, with Bitcoin reaching its highest level since summer 2022 at $31,500 before rapidly dropping below $30,000 due to the strong labor market data. The price has since stabilized within a consolidation range, fluctuating between $30,000 and the strong resistance level of $31,000. It is important to note that the overall trend remains bullish, but the misconception of parabolic price increases by hundreds of percentage points within a few days or weeks after the halving event persists among many market participants. Instead, there will continue to be surges followed by corrections, sideways movements, and consolidation phases. Currently, major market participants remain undecided, as supply and demand are balanced, preventing either the bulls or the bears from gaining the upper hand.
The current developments in US stock markets reflect investor concerns over rising interest rates and the impact of the trade dispute between the US and China. These factors have contributed to a significant downturn. The US dollar has shown limited reaction to the rising interest rates. Oil prices have remained relatively stable, while individual companies such as Meta Platforms, JetBlue Airways, and VBI Vaccines have experienced varied performance. Cryptocurrency markets have also seen losses, with Bitcoin undergoing a consolidation phase. The situation will continueto unfold in the coming days and weeks, and it remains to be seen how these developments will affect the markets.
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