Global stocks are down for a third successive day, what’s going on in Wall Street and should investors be concerned about their portfolio?
Sept. 28, 2021
Investors have been concerned about a number of issues lately which has sent markets shaking. While important developments are occurring in the markets and economy, they are all short-term noise and won’t impact a diversified long-term portfolio. Having said that, it’s always good to know what is going on Wall Street so let’s take a look.
China stocks are spiraling
Last week, Big Tech stocks fell amid speculation that China’s real estate industry is slowing down. Shareholders who have a financial interest in China feared that the development might result in a potential debt default for real estate giant Evergrande, which could spark a credit crisis. This news even impacted huge technology companies Apple and Amazon, which both fell between 2% and 3% respectively. For many, this was an ideal buying opportunity, but it still spooked investors.
Outside of China, there are other factors in the U.S. that are also affecting the stock market. This week, shareholders continue to be worried about economic growth and inflation, which has sent bond yields higher. A rising yield indicates falling demand for treasury bonds, government debt securities, which means that investors are preferring high-risk investments.
The stock market today
Futures tied to the Dow Jones Industrial Average (NYSEARCA: DIA) are opening lower today after rising marginally yesterday. The S&P 500 (NYSE: VOO) and tech-heavy Nasdaq (NASDAQ: QQQ) futures also are starting the day off on a weak footing.
In early trading today, higher bond yields are also putting pressure on tech stocks, evidenced by the Nasdaq underperforming other major indexes. Rising interest rates tend to lower the current value of future cash flows which impacts growth and technology stocks whose companies predict significant profits in years to come.
The U.S. Federal Reserve Chair, Jerome Powell, will address lawmakers this week, with early comments showing that Powell might warn the Fed that it might have to raise interest rates if inflation becomes more persistent.
In some positive news, Ford (NYSE: F) stock jumped almost 3% in pre-market trading after it announced that it is making the largest investment in its 118-year manufacturing history by building an $11.4 billion mega plant to boost its EV efforts.
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