Major U.S. stock indexes extend fall after market’s worst April in decades

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U.S. stocks lost more ground Monday afternoon, with Dow industrials falling more than 300 points and the S&P 500 off by 1%, following the worst April performance for all three major indexes in decades.

The drop in Dow industrials was led by American Express Co. AXP, -3.81% and the Boeing Co. BA, -3.03%

What’s happening
  • The Dow Jones Industrial Average DJIA, -1.24% was down 307 points, or 0.9%, at 32,670.
  • The S&P 500 SPX, -1.35% fell 43 points, or 1.1%, to 4,089.
  • The Nasdaq Composite COMP, -0.85% traded down by 81 points, or 0.7%, at 12,254.

On Friday, the Dow fell 939 points, or 2.8%, to leave the blue-chip gauge down 4.9% in April. The S&P 500 fell sharply, entering its second market correction of 2022 and leaving it with an 8.8% monthly decline. The Nasdaq Composite dropped 13.3% last month. It was the worst April performance for the Dow and S&P 500 since 1970, and the Nasdaq’s worst for that month since 2000.

What’s driving markets

The focus is on the Federal Reserve, which is expected to deliver a half-point rate hike on Wednesday. Traders of fed-funds futures also see an 87% likelihood that the Federal Reserve delivers a 75 basis point rate hike in June, up from 19% a month ago, based on the CME FedWatch Tool.

See: A half-point Fed rate hike seen already baked in the cake

“The law of valuations combined with the reality of tighter Federal Reserve policy is throwing cold water on stocks that were way too overvalued,” said David Bahnsen, chief investment officer of The Bahnsen Group, a wealth management firm in Newport Beach, California, with $3.6 billion in assets under management.

“It is starting to feel very much like this is the moment when the market has had enough with stocks that were trading at excessive valuations,” Bahnsen wrote in an email. “We have not seen capitulation yet and while no one can time these things perfectly, I expect more market weakness ahead.”

Intense inflationary pressures, plus broad supply and labor bottlenecks, were reflected in the Institute for Supply Management’s index of U.S. manufacturing activity on Monday: That index fell 1.7 points to 55.4% in April and showed the industrial side of the economy grew at the slowest clip in 18 months. Economists polled by The Wall Street Journal had expected the index to rise to 57.8% from a one-and-a-half year low of 57.1% in March. Any number above 50%, nonetheless, still signifies growth.

Treasury yields resumed a march higher Monday, with rates from 5 to 30 years out all trading at or above 3%, another headwind for the growth stocks that populate the Nasdaq. The yield on the 10-year Treasury note TMUBMUSD10Y, 2.988% jumped 10 basis points to 2.99%. Yields and debt prices move opposite each other.

Read: Farewell TINA? Why stock-market investors can’t afford to ignore rising real yields.

“From a technical perspective, the 4,200 level for the S&P 500 was a key area of support that was broken last week as selling pressure overwhelmed any additional demand,” David Keller, chief market strategist at StockCharts.com, said in an email to MarketWatch. “If the S&P breaks 4,100, I would expect further downside to around 3,800.”

Some attention was focused on data from China over the weekend that showed manufacturing activity dropped to a six-month low in April as lockdowns continued in Shanghai and other manufacturing hubs amid Covid-19 outbreaks.

Over the weekend, Berkshire Hathaway BRK.A, -2.25% BRK.B, -2.90% reported stronger-than-forecast earnings after buying back $3.2 billion in stock. Chairman and CEO Warren Buffett told shareholders that a “casino”-like market environment allowed the conglomerate to quickly build up a stake in Occidental Petroleum OXY, +3.02%, as he also revealed that he’s back in the merger arbitrage business after buying up just shy of 10% of Activision Blizzard ATVI, +2.80%, the videogame maker that’s agreed to be purchased by Microsoft Corp. MSFT, +0.34%. Activision shares rose 2.7%.

Also read: At the Berkshire Hathaway annual meeting, Warren Buffett aims to assure shareholders

Which companies are in focus?
  • European Union antitrust authorities have told Apple Inc. AAPL, -2.38% that they have formed a preliminary view that it has abused its dominant position in markets for mobile wallets. Shares fell 1.8%.
How are other assets trading?
  • The ICE U.S. Dollar Index DXY, +0.76%,  a measure of the currency against a basket of six major rivals, was up 0.6%.
  • Oil futures rose, with West Texas Intermediate crude for June delivery  CLM22, +0.19% up less than 0.1% near $104.73 a barrel.
  • Gold finished with its worst daily loss in nearly two months, with futures shedding 2.6% to settle at $1,863.60 per ounce.
  • The Stoxx Europe 600 SXXP, -1.46% closed down by 1.5%, while London markets were closed for the early May bank holiday. European equities were briefly rattled after a “flash crash” that appeared to hit Nordic markets hard.
  • Japan’s Nikkei 225 NIK, -0.11% finished 0.1% lower on Monday. The Shanghai Composite SHCOMP, +2.41%   and the Hang Seng Index  HSI, +4.01%   in Hong Kong were both closed for the Labor Day holiday.

—Barbara Kollmeyer and Steve Goldstein contributed to this article.