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of S&P500 It sank 100 points in the final two and a half hours of trading on Thursday, raising concerns about an impending stock market crash. Indeed, stocks have had a dismal start to the second quarter, leading some investors to wonder if this week’s pullback is just the beginning of a deeper downturn.
Is that…?
It’s certainly too early to tell, but it’s clear that investors aren’t sure whether the first quarter’s stock price gains can be sustained into the second quarter.
Investors appeared bearish Thursday after Minneapolis Fed President Neel Kashkari suggested the Fed may not cut interest rates this year unless inflation continues to ease. . This is likely the reason for his spontaneous 2% drop in trading over the past few hours.
In addition, first-quarter earnings expectations fell to 5.1% from 7.2% at the beginning of the year. However, it is relatively common for earnings estimates to decline slightly between the start and end of a quarter, after which earnings often outperform lower-end estimates.
Now, despite yesterday’s drop, the stock is still up nearly 10% since the beginning of the year. In fact, the S&P has been up almost steadily so far this year, and the widely-watched index remained at an all-time high last week.
Is this week’s decline the beginning of a broader stock market crash?
Despite yesterday’s decline, stocks look set to end the week on a strong note. In fact, as of this writing, the S&P is up 1.3% as investors react to March’s strong jobs report.
The U.S. economy added a staggering 303,000 jobs in the third month of this year, far more than expected. This brought the unemployment rate to 3.8%, in line with forecasts.
While this is a positive sign for the economy, it also gives the central bank more room to continue delaying rate cuts until later in the year.
According to the CME FedWatch tool, there is a 94.6% chance that the central bank will keep interest rates unchanged at its next policy meeting in May. However, the tool still estimates a 58% chance of a rate cut at the June meeting.
“This good news is bad news for the bond market. It makes it less likely that the Fed will cut rates sooner and more often, and we may not see the first rate cut until July. “Yes, but it could be good news for the stock market.” Chris Zaccarelli, chief investment officer, Independent Advisor Alliance It is likely to rise.”
On the date of publication, Shree Dua did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are subject to InvestorPlace.com Publishing Guidelines..
