Although Wall Street had the best start to 2018 in more than three decades, things turned bitter to end the first quarter, with many sectors and stocks entering correction territory from their latest peak. With a day’s trading left, the S&P 500 is down 2.6% and on track for the worst quarter in two and a half years.
A combination of factors like concerns over faster-than-expected rates hike, trade tensions, and the health of the technology sector pushed the Wall Street from deep green to red.
Rate Hike Fears
The first round of brutal trading came in early February following the better-than-expected wage growth, sending major indices into correction territory. At the lower levels, the S&P 500 shed about $2.5 trillion in its value from Jan 26. Then, the Fed minutes and the new Fed chairperson Jerome Powell took away some sheen from the riskier assets.
Again in early March, Trump’s tariff news spooked markets, sparking threats of a trade war. President Trump imposed severe tariffs of 24% on steel imports and 10% on aluminum imports that could lead to retaliation from other countries thereby resulting in unforeseen consequences. Although this fear faded with Trump and other countries starting negotiations, the President’s intention to impose tariffs on up to $60 billion of Chinese imports, targeting the technology and telecommunications sectors, led to bloodbath in the stock markets yet again.
Then the panic was created by the social media giant Facebook (FB – Free Report) following the data breach report, which sparked concerns about data privacy and security, resulting in increased scrutiny and possible regulatory pressure. The news has taken a toll not only the broader technology sector but the broad U.S. market as well. This was followed by a slew of negative news that again has sent the sector into a tailspin this week, with FANG stocks being the biggest losers.
In particular, the most recent tech rout has washed away about $2.34 trillion from the market cap of the S&P 500 since its peak in late January. This means that almost one-third of the Trump rally was erased during the current market pullback.