Stock Crash: US Markets Plunge, Nasdaq Down 28.3%, Dow Drops 1,800 Points in 3 Days, Trouble for A-Shares

Last night, U.S. stocks experienced another significant decline, with the Nasdaq index's retracement reaching 28.3%, and the Dow Jones index falling by 1816 points in just three trading days.

The decline was not limited to stocks but also included commodities such as gold and crude oil. Additionally, U.S. Treasury bonds fell, with their yields continuously reaching new highs.

It seems that the prospects for A-shares and Hong Kong stocks are also not optimistic today.

01, U.S. stock market plunge

Yesterday, while observing the closing of Asian markets and the opening of European markets, I pointed out that the Federal Reserve is currently under market criticism. The interest rate hike of only 50 basis points was not only not recognized by the market, but experts generally believe that a more substantial rate hike should be implemented under the current inflationary conditions.

Under these circumstances, everyone has turned their attention to the upcoming CPI data to be released on Wednesday, and they have started to consider whether the interest rate meeting in June should break through Powell's previous statement of "not exceeding 75 basis points."

The stock market has responded truthfully.

After a weekend, the three major U.S. stock indices fell across the board on Monday.

The Nasdaq index fell by 4.3%, setting a new low since the beginning of this round of adjustments. Since the end of November last year, the Nasdaq index has fallen from its high of 16,212 points to the current 11,623 points, with a retracement of 28.3% in this round.

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The Dow Jones index fell by more than 1816 points in three trading days. After the Federal Reserve announced the interest rate decision in the early morning of Thursday, the Dow Jones index rose miraculously, closing at 34,061. Unexpectedly, it has only been three trading days since then, and last night's closing fell to 32,245 points. The Dow Jones index also set a new low for this year.The S&P 500 index broke below 4,000 points, also setting a new low since this round of adjustment.

In just 2022, the Nasdaq has already fallen by more than 25%, and the other two major stock indexes have also fallen by more than 10%. From the current situation, the US stock market may be the worst start of the year since 1939.

02, General Downturn

The decline of the Nasdaq means that technology stocks are generally falling, with Amazon, Apple, and Netflix falling by 3% to 5%, and Tesla and Nvidia's decline exceeding 9%.

Among large companies, Boeing is the largest decline in the Dow, with a decline of more than 10% last night.

Chinese concept stocks have also ushered in a round of sharp declines, with the Nasdaq Golden Dragon Index falling by 7.8%, many Chinese concept stocks falling by more than 10%, and more Chinese concept stocks falling by 5% to 8%. In the new energy vehicles, the decline of Weilai, Xiaoli, and Li all reached more than 9%.

Looking at the various industries of the US stock market from the perspective of ETFs, it is surprising that the energy ETF fell by 8% yesterday, and the aviation decline reached 6.3%.

However, this may be related to the significant decline in commodity prices yesterday. Last night, gold fell by 1.55%, and crude oil fell by 6.76%.

The European stock market, which closed earlier last night, also fell sharply.

The decline in the UK, France, and Germany last night all exceeded 2%. However, overall, although Europe has been deeply affected by the sudden outbreak of conflicts this year, the overall decline of the European stock market is actually lower than that of the US stock market.Germany's current decline of 15.8% is not only lower than the S&P 500's 16% drop but also significantly lower than the Nasdaq's 25.7% plummet.

Moreover, it is particularly noteworthy that the UK has only fallen by 2.3% this year, becoming the most attractive market in Europe. This may be greatly related to the Bank of England's early interest rate hikes, which have already occurred four times, far more than in the United States.

03, What should the Federal Reserve do?

Currently, the yield on the 10-year U.S. Treasury has reached around 3.1%, and it even broke through 3.2% at its highest during the trading day, marking the highest level since the end of 2018.

Looking back at the end of 2018, many may remember that although the interest rate hikes were in the middle and later stages, the U.S. Treasury yield continued to rise, forcing the Federal Reserve to begin quantitative tightening. After that, the U.S. Treasury yield fell, and bond prices stabilized.

The continuous rise in U.S. Treasury yields has had a significant impact on large technology companies on the Nasdaq, with funds continuously flowing out of tech stocks. Over the past four weeks, U.S. funds have seen an outflow of $37 billion, which is also the largest outflow since 2018.

The sentiment in the global stock market has currently dropped to an all-time low, with most people being very bearish on U.S. stocks. Online surveys show that 53% of investors believe that the market will continue to decline in the future.

Whether the market can recover and whether it can stop falling and rebound, the most important factor at the moment seems to be whether the Federal Reserve can come up with any good solutions to stabilize bond interest rates and bring the U.S. Treasury yield back below 3%.

Now, the upcoming release of the CPI data and the Federal Reserve meeting in June are increasingly becoming the focus of everyone's attention.