Goodbye, Dow 30,000

Dow drops 800 points, dropping below 30,000 for the first time in more than a year.

The Dow Jones Industrial Average fell below 30,000 on Thursday, as investors worried that the Federal Reserve’s more aggressive approach to inflation might send the economy into a recession.

The Dow had rallied on Wednesday after the Fed issued its greatest rate hike since 1994, but it lost those gains and then some on Thursday, plunging to its lowest level since January 2021.

The Dow fell 810 points, or 2.6 percent. The S&P 500 fell 3.3 percent, while the Nasdaq Composite fell 4.1 percent.

The major averages began Thursday’s session down 4.5 percent, 5.7 percent, and 5.6 percent for the week, respectively, and well below record levels.

Both the S&P 500 and the Nasdaq Composite are in bear market territory, having fallen around 23% and 34% from their all-time highs in January and November, respectively. Meanwhile, the Dow lost almost 19% from its all-time intraday high set on January 5.

”It’s about time we exit this artificial world of predictable massive liquidity injections where everybody gets used to zero interest rates, where we do silly things whether it’s investing in parts of the market we shouldn’t be investing in or investing in the economy in ways that don’t make sense,” Allianz chief investment advisor Mohamed El-Erian said on CNBC’s “Squawk Box” on Thursday. “We are exiting that regime and it’s going to be bumpy.”

The Dow fell below 30,000 for the first time since January 4, 2021, after initially breaching over that level in November 2020. This occurred when the introduction of Covid-19 vaccines and substantial Fed stimulus fuelled a larger market boom, spearheaded by technology companies, and lifted the major averages to then-record highs.

The Dow‘s break over 30,000 pushed it more than 60% above its record closing low at the time. While 30,000 isn‘t necessarily a technical milestone for the Dow, many on Wall Street regard these round 1,000-point barriers as important psychological benchmarks for the market.

Data released on Thursday revealed yet another significant decline in economic activity. Housing starts fell 14% in May, above the 2.6 percent drop predicted by Dow Jones analysts polled. The Philadelphia Fed Business Index fell to a minus 3.3 in June, the first drop since May 2020.

Home Depot, Intel, Walgreens, JPMorgan, 3M, and American Express all set fresh 52-week lows as recession worries grew, while tech stocks fell following a brief rally on Wednesday. Tesla, PayPal, Nvidia, Amazon, and Netflix all fell more than 3%. Travel stocks such as United, Delta, and Carnival all dropped.

In a tweet Thursday, CNBC’s Jim Cramer said, “There is an astonishing level of tech selling right now,” “It is breathtaking to watch as sellers are sending the best techs down gigantically at 5 a.m.”

Staples companies, known for their consistent cash flows that can withstand recessions, traded in the green or around the flatline. Procter & Gamble increased by 1.6 percent. Walmart and Colgate-Palmolive were marginally higher.

Markets originally welcomed the Fed’s intention to raise interest rates by 75 basis points, with the possibility of more increases of a similar magnitude. The Dow and S&P 500 closed the session higher after a five-day losing run. The 30-stock index gained roughly 304 points, or 1%, while the S&P 500 gained 1.46 percent. The Nasdaq Composite, which is heavily weighted in technology, was the relative outperformer, jumping 2.5 percent.

Market mood looked to deteriorate once again on Thursday, as central banks across the world embraced more aggressive policy postures and investors questioned the Fed’s ability to pull off a soft landing.

The Swiss National Bank hiked interest rates overnight for the first time in 15 years. The Bank of England was expected to hike interest rates for the seventh time in a row on Thursday.

As stocks sank, the 10-year Treasury yield began its huge June run and was last trading about 3.44 percent, up from 2.84 percent at the end of May.

The major averages have been pulled down by rampant inflation, which is at its highest level in 40 years, as well as concerns about slowing economic growth and a probable recession.

Information from CNBC was used in this report

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