US Stocks Slide, and Then Recover, as Uncertainty Reigns Supreme
The global stock markets endured a frantic day yesterday, with all the major indices in Europe falling.
Uncertainty already plagued the markets ahead of the Federal Reserve’s policy meeting this week, but this has been heavily exacerbated by the looming prospect of war between Russia and Ukraine.
Illustrating this point perfectly was the CBOE Volatility Index (VIX), sometimes referred to as the “fear index”, which is used to gauge investor anxiety in the US markets. Yesterday, the VIX rose 3.64% closing the session at 29.90; however, the index touched an intraday high of 38.94, its highest level since November 2020. Volatility is usually considered to be high when the VIX level is above 20.
On Monday, we learnt that both the UK and US have recalled certain embassy officials from Kyiv; NATO also announced that it was reinforcing its eastern borders amidst escalating tensions. Increasing anxiety born from the increasingly negative news sparked a sell-off for many stocks.
The FTSE 100, DAX 40, CAC 40 and IBEX 35 all fell 2.63%, 3.80%, 3.97% and 3.18% respectively during trading.
Wall Street, which spent the vast majority of the session in the red, remarkably managed to claw back losses, with the main indices all closing in positive territory. The S&P 500, which was down almost 4% intraday, ended the day with an increase of 0.36%.
Tech stocks continued to bear the brunt of uncertainty, firstly dragging Wall Street down but then aiding the recovery, as investors bought the dip. Although not all tech stocks closed the day with gains.
One tech stock which is having a particularly difficult time at the moment is Netflix. After hitting an all-time high in November, the streaming giant has fallen more than 40%.
On Friday, Netflix fell 21.8% following weak forecasted subscriber growth in the first quarter of 2022. Analysts had previously forecast that Netflix would add 5.9 million subscribers between January and the end of March, but, last week, Netflix projected that it would in fact add less than half this number – just 2.5 million.
And, yesterday, the streaming platform fell a further 2.6% after Jeffries analyst Andrew Uerkwitz downgraded the streaming platform from “buy” to “hold” and significantly trimmed his price target from $737 to $415, partly in response to Friday’s figures.
Netflix was one of “stay-at-home” stocks’ best performers during the pandemic, however, its performance over the last few months has seen it more or less return to pre-pandemic levels. As Covid-19 restrictions around the world relax, investors seem to have little confidence that Netflix can return to the exceptional fast growth achieved during lockdown.
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