An ugly trading session as U.S. Equity Markets reversed Monday’s gains before getting slammed in the last hour of trading. The NASDAQ 100 led the declines closing lower by 3.87%. This move lower saw the VIX surge 24%, closing at a price of 33.52. According to research from Wall Street brokerage firm Bank of America, sentiment for higher-income households declined in April from March’s 37.2% to 28.3%. This change is noteworthy as it indicates the wealthiest households are the ones who have invested the most in the stock market. The figure also suggests that income for those households is not gaining as quickly as inflation. As a result, they may be basing their spending decisions on needs rather than wants. If this trend continues, sentiment could further sour and potentially weigh on future spending. Hedge fund investors have been shorting technology stocks. They are concerned about the outlook for economic growth and inflation. Wall Street’s prevailing issue is that all of the Congressional stimulus introduced during the coronavirus pandemic pulled demand for goods forward. But now, the business is slowing. In the fourth quarter of 2021, shipments fell 5% compared with the year prior. And in the first quarter of this year, the industry showed a 6.8% contraction compared with 2021. Gartner cited a drop in educational demand for Google’s Chromebooks. The firm also said 2021 saw the highest growth in decades. The same pull forward in demand created shortages for all types of goods. Over the last two years, we have seen prices for materials like West Texas Intermediate crude oil go up 192%, lumber jump 217%, and steel surge 184%. The dynamic has caused the U.S. Bureau of Labour Statistics March Consumer Price Index (“CPI”) reading to hit the highest level since 1981. In the process, economic activity has more than surpassed pre-pandemic levels of activity. According to the U.S. Bureau of Economic Analysis (“BEA”), economic output averaged about 5.3% growth last year. That is far above the 2.3% average expansion in the 10 years prior to the coronavirus pandemic. That means external support for the economy has remained in place for too long. The lack of fiscal stimulus and easy-money monetary policies will weigh on the economic growth outlook as individuals see credit metrics tighten. Within the S&P 500, 10 of the 11 sectors finished lower. European Markets closed lower. Russia warned the U.S. against sending more military aid to Ukraine, saying it was increasing tensions while making it more difficult to reach a peace agreement. Russian Foreign Minister Sergey Lavrov warned that the threat of nuclear war due to the Ukraine conflict was very serious and should not be underestimated. The German government approved an amendment that would allow it to nationalise energy firms in the event of a supply crisis. Mining and energy stocks rallied with a rebound in oil and metals prices. In Asia, Japan’s unemployment rate for March declined to its lowest level in almost two years, signalling economic activity may be on the verge of rebounding. South Korea’s advanced first-quarter gross domestic product exceeded expectations, supporting additional central bank interest-rate hikes. The People’s Bank of China said it will increase policy support for industry and small businesses while ensuring ample liquidity and promoting financial stability. China’s capital city of Beijing ordered citywide COVID-19 testing as fears of increasing infections and widening social-distancing restrictions grew. Elsewhere, Oil rose 3.21% on the possibility of European Countries banning oil and gas from Russia, while Gold closed 0.31% higher on little news.
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