Multiple bearishness caused the New York stock market to fall continuously

Source: Xinhua Net

New York, 20 Jan (Xinhua) -- Roundup: Multiple bearish shorts have caused the New York stock market to fall continuously

Xinhua News Agency reporter Liu Yanan

The New York stock market has fallen significantly over the past three consecutive trading days due to factors such as higher Treasury yields driven by expectations of tighter monetary policy by the Federal Reserve, the apparent impact of the COVID-19 pandemic on economic activity, and the weaker-than-expected performance of a number of listed companies. Market research firms believe that the high volatility of the New York stock market will continue for several months. Dragged down by technology stocks, major stock indexes still have room to fall, affecting investment return expectations this year.

The data shows that compared with the closing price on the 14th, the Dow Jones Industrial Average, the S&P 500 Stock Index and the Nasdaq Composite Index have fallen by 3.33%, 3.86% and 4.97% respectively in the past three trading days. Compared to the previous all-time closing high on November 19, 2021, the NASDAQ Composite index has fallen by 11.85%.

Since the end of last year, market expectations for quantitative tightening by the Federal Reserve have risen. The US 10-year Treasury yield continued to rise and reached 1.9% at one point in the 19th intraday.

Fiona Chinkota, an analyst at Forex broker Forex BrokerSA, said that the Fed is expected to raise interest rates from March this year, the federal funds rate will reach 2.5% at the end of this round of interest rate hike cycle, and the Fed will shrink its balance sheet very quickly, and the policy combination of "rate hikes + balance sheet reductions" will have a greater impact on market expectations.

At the same time, the recently released US finished housing sales data, unemployment data, retail sales data and consumer confidence index have all performed poorly. The economic impact of the large-scale spread of the mutated new coronavirus, the Olmikharon strain in the United States, began to show.

Like JPMorgan Chase and Citigroup, Goldman Sachs' performance was negatively impacted by higher operating expenses, such as rising employee compensation. Goldman Sachs released a performance report on the 18th that its profit in the fourth quarter of 2021 was lower than expected, dragging down the stock price performance.

Chinkota said the S&P 500 has fallen out of its upward path since mid-October 2021 and could have more room to fall.

The Fed will hold a regular interest rate meeting on the 25th and 26th. Under the expectation of tightening monetary policy, the performance of the stock market is also an early digestion of bearish news to a certain extent.

Savita Subramanian, equity and quantitative strategist at Bank of America's Global Research Division, believes that the expansion of the Fed's balance sheet since the 2008 global financial crisis explains the return on investment of the S&P 500 more than the profits of listed companies. Considering that the Fed will implement measures to shrink its balance sheet later in 2022, the Bank of America Liquidity Framework model shows that the S&P 500 will have low returns by the end of 2022.

Ryan Detrick, chief market strategist at LPL Finance, said investors could face more sharp gains and losses this year as interest rate hikes and midterm elections come.

Still, some institutions remain relatively optimistic, arguing that corporate growth will remain solid and that interest rate hikes will not derail the stock market.

UBS said that while the technology sector is expected to remain volatile, the pressure on the sector from Treasury yields will fade in the coming months. The US 10-year Yield is expected to rise to around 2% in June and 2.1% by the end of 2022, after which no further sharp gains are expected.

UBS expects U.S.-listed companies to see 30 percent year-over-year earnings in the fourth quarter of 2021, 7 percentage points higher than market expectations, reflecting a recovery in economic activity and a stronger consumption.