Inflation Fears Resurface, Sell-Off, Mainly In Tech Stocks, Ensues

Monday session took an interesting turn following a rally in Oil that took it to a seven-year high. Investors and traders are already juggling different variables including inflationary concerns, especially renewed ones following the Oil rally, slightly weaker than expected earnings season, the debt ceiling and a central bank that is switching to a more hawkish stance.


The above, coupled with October being known as a volatile month compared to the rest of the year saw markets moving with higher velocity. The outcome was a broad sell-off that saw tech stocks sharply lower, exacerbated by a Facebook outage that also hit Instagram and WhatsApp and saw shares trading over 5% lower.


The Dow Jones Industrial Average closed 0.94% lower while the S&P suffered losses of 1.3% and the Nasdaq composite dipped 2.14% and declined over 300 points to finish at 14,255.48. The index is currently down by 7.3% from its September 7 record close. The weakness spilled into the overnight session with Japanese stocks also lower and the Nikkei ending down by 1.1%.


According to traders, the overall markets remain bullish and while sharp declines in US equities can be concerning, they also present opportunities to approach the market from the long side again. Further sentiment across the markets revealed that short term weakness could persist given concerns that do not have a clear direction, including inflationary pressures and the debt ceiling.


While today’s data is relatively light, non-farm payrolls are set for Friday with the unemployment rate and the average hourly earnings. A better than expected overall figure could reinforce the case for more hawkish moves by the Fed and lead to increasing volatility in the markets, according to analysts. ADP will also be released on Wednesday alongside crude Oil inventories and a scheduled event by the RBNZ where interest rates are expected to be increased to 0.5% from 0.2%.


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