Investors are growing increasingly spooked as stocks face their worst month of the year. A combination of rising bond yields, soaring oil prices, and slowing economic growth has triggered a widespread sell-off, even impacting once-popular mega-cap tech companies. This market turmoil is putting pressure on President Biden’s approval ratings, particularly concerning his handling of the economy. The situation is further exacerbated by a wave of strikes and the looming possibility of a government shutdown. As a result, both the S&P 500 and Nasdaq have seen significant declines.
Three key factors are contributing to investor worries. First, oil prices are rapidly approaching $100 per barrel, raising concerns about inflation. If energy prices continue to rise, the central bank may feel compelled to raise borrowing costs, potentially leading to prolonged high interest rates. Second, investors are dumping bonds, causing yields on 10-year Treasury bills to reach a 16-year high. This could impact various long-term loans throughout the economy. Lastly, the A.I.-fueled tech rally that has been driving the market for months appears to be losing momentum. The large-cap tech stocks that led the market to a bull market in June are now far from their July highs, with doubts emerging about the sustainability of their valuations.
In addition to these concerns, investors are also reacting to worse-than-expected results from chip maker Micron. The company reported a quarterly loss, which further contributed to the sell-off. Overall, the market’s current state reflects a growing anxiety about the economy, fueled by a triple whammy of factors that are alarming investors and causing them to reevaluate their positions.
