FX.co ★ Collapse in US stock market begins

So, a collapse in the US stock market has officially begun. Over the past two weeks, the NASDAQ has lost 1,700 points, the S&P 500 has dropped by 343 points, and the Dow Jones has fallen by 2,140 points. Clearly, this is not Black Friday. Nevertheless, such behavior of the major US stock indices shows that investors have started to sell off certain stocks. Tech stocks are at the highest risk. So, Tesla stock tumbled by $198 in the past two weeks, Apple dropped by $20, and Microsoft lost $40. So, markets are now pricing in what is currently happening, we may say. What do we know at this point? The US Federal Reserve made it clear that it would abandon the QE program and make 3-4 rate hikes in 2022. Some major market participants suggest there could be even more rate hikes and the regulator could not only end asset purchases but also start to reduce its balance. In other words, it could announce a sell-off of its Treasury securities purchased over the past 10 years. The US central bank started to buy out securities after the world was hit by the financial crisis in 2008. Not all market participants are content with the hawkish Federal Reserve. Indeed, policy tightening is posing a real threat to risk assets. Therefore, stocks and cryptocurrencies are falling in the first place. At the same time, bonds, deposits, and other low-risk assets may increase. Yields on such investment instruments are likely to grow if interest rates are raised. Generally speaking, stock demand is expected to decrease this year. Moreover, there is a bubble in the stock market.

In addition, yesterday's US statistics came disappointing. The weekly jobless claims report logged a rise in initial claims for unemployment benefits to 286K, well above market expectations of 227K. Meanwhile, the number of continuing jobless claims increased to 1.635 million. So, unemployment in the country is accelerating, and Omicron could be the reason why. In addition, the Nonfarm Payrolls reports came pessimistic in the past two months, which means that the US jobs market is recovering slower than planned. Therefore, the Federal Reserve's primary goal in 2022 will be to curb inflation. For that reason, the US stock market is expected to go through tough times this year.