Why the Dow Jones (Stock Market) is down by almost 15%?
The Dow, also known as the Dow Jones Industrial Average, which represents the thirty large U.S. based public organizations, has dropped by nearly 20 percent with the year coming to an end. The Dow Jones Industrial Index declined by 464 points or two percent on the 21st of December, 2018. The drop was a result of the decline registered in the Target shares that put the retailers under immense pressure. However, aside to Target other popular technology shares also witnessed a drop all over again. Together, these and many other factors have contributed to the drop in the Dow Jones Industrial Average index. Continue reading to find out more.
Reasons behind Dow Jones’ Decline
It must be noted that Target dropped by 10.5% after the company reported weaker earnings in October. The company’s sales from their stores were also very low, which further put the retailers under a lot of fear. The Dow Jones dropped by 551.80 points to reach 24,465.64. Following the market development, the index was almost 2500 points lower than its highest level.
A number of reasons have contributed to the drop in the Dow. For instance, the rates of interest are higher as well as the prices of oil crashed as a result of the war between the United-States and China. Investors continued to move away from the technology shares, which at one point had contributed towards the growth of the stock market. For instance, Apple’s iPhones (the latest version) received a lukewarm response from the market whereas other leading tech stocks such as Netflix, Amazon and even Alphabet declined from their previous positions and closed at bearish levels.
When put together, the market price of Amazon, Facebook, Alphabet, Netflix, Microsoft and Apple dropped by over 1.1 trillion dollars. In view of the drop in the tech shares, Morgan Stanley reinstated that the stock market in the United States is experiencing bearish trends. In fact, the fear of a slowdown within the retail industry as well as the poor results of Kohl and Target caused their shares to tumble by another 9 percent in October.
Aside to the technology sector, the stocks of the energy sector also recorded huge losses, which caused the Dow to drop further. Chevron, Hess and ExxonMobil lost their ground after the prices of oil dropped by 7 percent in October to reach $53.43/barrel. The fear of excessive supply as well as weak demand put crude oil into a bearish mode.
Conclusion
A look at the latest selling pattern suggests that the investors are really worried about the country’s economic performance. These fears have been further aggravated by investors who feel concerned about Fed’s decision to continue to hike the rates of interest. The market’s sentiments have also been affected after President Donald Trump declined to pass the spending bill, which was required for preventing a shutdown of the government. Even though, a shutdown that takes place for a brief period wouldn’t impact the economic position of the country.