The Dow Jones fell nearly 350 points, or 1.1%, at midday. Blue chips are now down almost 15% this year.
The S&P 500, which is dangerously close to falling 20% from the all-time high it hit on Jan. 3 and in a bear market, fell 0.8%. The tech-heavy Nasdaq, which is already in bearish territory, edged lower. The Nasdaq has plunged 27% this year alone.
Top tech stocks were among the market’s biggest losers on Thursday after Dow component Cisco reported sales that missed forecasts and also gave a weak outlook. Cisco (CSCO) fell 12% on the news.
But Kohls (KSS) shares rose nearly 4% on Thursday in volatile trading, even as the struggling chain reported a huge profit loss and cut its forecast.
The poor results of business leaders also sound the alarm of the recession. More and more pundits are starting to predict a downturn later this year or early 2023. The unease on Wall Street is palpable.
“What’s the catalyst? What will make investors buy more and give them confidence in the market? I don’t think there is anything at the moment,” said JJ Kinahan, strategist in chief of the market at tastytrade.
the VIX (VIX), a measure of Wall Street volatility, has nearly doubled this year. And the CNN Business Fear & Greed Index, which examines the VIX and six other measures of market sentiment, shows signs of extreme fear.
“Investors need to keep their seat belts fastened. This period of volatility is probably not over,” said Tom Galvin, chief investment officer at City National Rochdale.
“There’s a long list of uncertainties,” Galvin added, citing the Federal Reserve’s rate and inflation policy, concerns about new Covid outbreaks in China and the US invasion of Ukraine. Russia as lingering concerns.
Galvin said investors would do well to avoid speculative tech stocks and European equities due to concerns about excessive valuations and a potential economic slowdown. Instead, he recommends quality blue chip stocks that pay regular dividends.
Investors may also be increasingly concerned about how market turmoil is hurting large hedge funds and other institutional investment firms.
A leading hedge fund, Melvin Capital, has announced its intention to close after betting against soaring stocks of memes like GameStop (EMG) in 2021 and making some bad purchases of travel stocks this year.
Traders bailed out risky tech stocks, bitcoin and other cryptocurrencies and other investments that could benefit from an economic rebound.
“There’s definitely more fear and nervousness out there,” said Dan Pipitone, CEO and co-founder of TradeZero. “The crypto crash is also having an impact. There is a wait-and-see approach. People are sitting on the sidelines waiting for a clear direction on where we are going.”
Instead, investors are now flocking to stocks that are seen as better hedges against inflation and rising interest rates and, in some cases, the beneficiaries of it.
Case in point? Oil stocks are the big market winners this year. Chevron (CLC)up more than 40%, is Dow’s top stock, and it’s one of Warren Buffett’s four largest holdings. Berkshire Hathaway (BRKB)which largely beats the market this year.
Berkshire is also a big investor in western oil (OXY)which has more than doubled this year and is the best performer in the S&P 500.
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