U.S. Financial markets had their
worst day since the start of the
pandemic.
Just one day after the Dow Jones
industrial average posted its
best day since 2020.
The Dow lost 1063 points.
To close at 32,997.
Down 3%.
The tech heavy NASDAQ took a
bigger hit overall down 647.
A fall of nearly 5%.
The S&P 500 fell 153 points to
close at 4146, losing three and
a half percent.
The S&P 500 has dropped or than
13% since the start of the year.
To help explain what is behind
all this, I'm joined by special
correspondent Catherine rampell.
Hello, Catherine.
Yesterday there was this big
climb, 900 points.
Today it is down over 1000.
What is happening?
>> It is a lot of whiplash.
This record growth since 2020
followed by a record decline
since 2020.
I think a sickly yesterday there
was a bit of euphoria in the
markets.
Fed chair Jay Powell indicated
the fed might be a little less
hawkish than some traders had
expected him to be.
He basically said for right now
we are not considering a three
quarters of a percentage point
rate hike anytime soon.
There was this buying spree
because a lot of people thought
the fed was going to start
tightening even faster.
Today, people woke up, maybe
with a bit of a hangover and
looked at the productivity
numbers that came out this
morning that were not great.
Productivity went down in the
first quarter.
They said maybe we overreacted
yesterday.
You saw a big selloff and some
panicking partly driven also by
some earnings misses from some
tech companies.
Judy: It was not there was
anything new from the federal
reserve.
It was these other factors and
just time to sleep on it?
>> Something like that probably.
I think to some extent, markets
are driven by animal spirits.
We cannot entirely pin down what
drives a particular increase or
a particular decrease from
day-to-day.
It does look like a lot of
traders thought maybe they
overreacted to that phrasing
from the fed yesterday and they
are looking at rates going up
for the rest of this year,
potentially next year as well
and that always weighs on
stocks.
Judy: What about the underlying
factors?
The underlying strength or
weakness of the economy overall?
To what extent does that play
in?
>> Over the last few months, I
think the economic forecast has
darkened somewhat because we
have gotten hit with a series of
unfortunate and bad shocks.
I'm talking about the lockdowns
in China affecting manufacturing
hubs and disrupting supply
chains.
There is the war in Ukraine
whose primary tragic consequence
is the loss of life but that has
also disrupted food markets
around the world, energy markets
around the world, fertilizer,
commodities.
As well as a bunch of other
things like a drought in
California and avian flu.
All those things are likely to
drive inflation higher which
suggests the fed will have to
act even more aggressively to
get inflation down and
historically when the fed has
had to raise interest rates to
deal with inflation, most of the
time they have tipped us into
recession.
If they have to act even more
aggressively today, there is a
greater risk we will have a
downturn in the next year or so.
Judy: Fasten our seatbelts.
The ride continues.
Thank you very much.
>> Thank you.