The Reserve Bank’s board meets on Tuesday under widespread expectation of the first rate rise since 2010.

ASX futures were down 94 points or 1.3 per cent to 7315 at the last trade on Saturday indicating a bleak start to the week.

The Nasdaq fell 4.2 percent on Friday, leaving it down more than 13 percent for the month in its worst performance since October 2008. The index is down 21% in 2022, its worst start to a year ever. The Dow dropped 2.8 percent, and the S&P fell 3.6 percent. Both indexes registered their worst months since March 2020.

Investors sent Amazon.com shares fell 14% on Friday, their largest single-day decline since at least 2014. The company reported its first quarterly loss since 2016 as costs increased and online shopping slumped.

The punishing drops in tech and growth stocks represent a sharp turnaround from previous years. Investors have bailed on shares of some of the largest tech companies, which were stock-market darlings for much of the past decade and helped lead gains in the indexes from the cynic lows of the pandemic.

In months, year after year best betters turned into losers. Netflix dropped 49% in April. Nvidia fell 32%. And PayPal Holdings fell 24%. All three are down more than 35% for 2022.

Fears of an interest rate hike by the Federal Reserve, rising inflation and the direction of the economy have sent stocks tumbling sharply from the record levels they opened the year at. Plenty of pandemic-era winners have also come crashing back to earth, as consumer tastes shifted since 2020.

“We’re entering a higher volatility regime, with fundamentals that matter again,” said Aashish Vyas, investment director at Resonanz Capital. “It does feel like we are at a systemic transition.”

Locally, the S&P/ASX 200 finished 1.1% higher at 7435 on Friday, with broad gains cutting the benchmark index’s weekly loss.

Tech stocks gained the most, adding 2.25 per cent after a bounceback from their US-listed peers, with nine of the ASX 200’s 11 sectors rising 1 per cent or more.

The three biggest tech stocks by market cap, WiseTech, Xero and Computershare, added 2.1% to 3.1% each.

The financial sector, which carries the most weight, gained 1.2%, with banks Commonwealth, ANZ, Westpac, NAB and Macquarie climbing between 0.6% and 1.8% higher.

Zip Co. surged 7.9% after Sezzle, which it plans to buy, announced cost reductions.

Kogan.com fell 13.9 percent to a more than two-year low of $3.91 after the company reported gross sales in the March quarter fell 3.8 percent from a year earlier.

Chief executive Ruslan Kogan said after wrongly preparing for ongoing strong growth this year, “market conditions are challenging at present” and that the online retailer would work on “recalibrating inventory levels”.

ResMed fell 4.1 percent to $29.14 after the maker of respiratory care devices said freight and manufacturing costs are squeezing its profit margin in the March quarter.

The ASX 200’s 0.5% loss on the week capped off a 0.9% fall in April.

In the commodity market, iron ore extended gains of 0.2% to $US142.35 a tonne; gold futures were up 1.1% at $US1911.70 an ounce; Brent crude eased 0.1% to $US107.14 a barrel.

Bond markets sold again and the yield on the Australian 2 Year government bond was up a tick to 2.42% and the 10 Year was higher at 3.12%. Overseas, US Treasury 2 Years yields rose to 2.71%, while the 10 Year closing was 2.93%.

The Australian dollar fell again, buying 70.60 US cents as at Saturday's last trade, from 70.96 at the prior close. The Wall Street Journal Dollar Index, which measures the US dollar against 16 others, ticked down to 95.51.

Asia

Chinese stocks soared on Friday after Beijing pledged to ramp up policy support to achieve official economic targets this year.

All three sectors gained, buoyed by strong earnings for individual stocks. Tianqi Lithium soared 10%, Great Wall Motor 8.0% higher and Yonyou Network Technology rose 8.1%. Cnooc jumped 10% after earnings, China Vanke and Haier Smart Home gained 3.6% and 5.6%, respectively, after their results, while Wuliangye Yibin fell 2.2%.

The Shanghai Composite Index rose 2.4 percent to 3047.06, cutting this month’s loss to 6.3 percent but still making April the second-worst month of the year so far. The Shenzhen Composite Index gained 3.9% and the ChiNext Price Index rose 4.1%.

Hong Kong stocks also closed sharply higher on promises from Beijing of policy support. The Hang Seng Index soared 4.0%, the biggest one-day rise for the gauge in more than a month, closing at 21089.39.

The Hang Seng TECH index was up 10%, as Chinese internet behemoths powered the rise, in part due to increased hopes they could retain their US listings after a report from Bloomberg said Beijing is negotiating with American regulators about a resolution to an audit issue that has put the lifeline of Chinese companies on New York’s exchange at risk. Both Alibaba and JD.com, which soared 16% to top the gainers on the index. Both companies have listings in the US. Consumer firms provided more support, with China Resources Beer up 4.6% and Li Ning climbing 4.3%.

The Japanese share market was closed on Friday for a public holiday.

Europe

European shares finished higher on Friday after officials in China promised to ramp up stimulus to protect the economy from widespread shutdowns caused by the coronavirus.

The Stoxx Europe 600 was up 0.7 percent, and London’s FTSE 100 gained 0.5 percent. The German DAX added 0.8 percent and the French CAC 40 rose 0.4 percent. Johnson Matthey surged 19% to the top of the Stoxx 600 after Standard Investments acquired a 5.2% stake in the UK chemicals group.

The Chinese Communist Party’s politburo pledged today to “strengthen macro adjustments” and hit growth targets.

“Rising commodity prices have done wonders to stabilise industrial European stocks, and perhaps even more importantly, the magic promise of Chinese stimulus has appeared, pushing commodity prices higher and giving stocks all over the continent a boost,” IG analyst Chris Beauchamp says in a note.

North America

An April rout in technology stocks deepened on Friday, pulling the Nasdaq Composite to its worst monthly performance in more than a decade as accelerating inflation and climbing interest rates raised fears of a recession.

The broad selloff has wiped out trillions of dollars in market value from the tech-heavy measure, as investors soured on shares of everything from software and semiconductor companies to social media behemoths.

The Nasdaq fell 4.2 percent on Friday, leaving it down more than 13 percent for the month, its worst month since October 2008. The index is down 21 percent in 2022, its worst start to a year on record.

The wider S&P 500 has now dropped for four consecutive weeks, giving up 8.8% in April and leaving it down 13% this year. The Dow Jones Industrial Average dropped 4.9 percent this month and is down more than 9 percent in 2018. Both indexes posted their worst months since March 2020.

The stock market’s declines on Friday accelerated into the closing bell, a phenomenon some traders ascribed to technical factors like hedging activity and trading continued by leveraged exchange-traded products. The Dow fell over 900 points, or 2.8 percent, and the S&P was down 3.6 percent.

Tech and Growth Stocks See Sharp Declines

The punishing declines in tech and growth stocks represent an about-face from recent years. Investors have abandoned shares of some of the largest tech companies, which had been stock-market darlings for much of the past decade and drove the indexes’ gains from the pandemic lows.

Within mere months, some of the most reliable winners become losers. Netflix dropped 49% in April. Nvidia fell 32%. And PayPal Holdings also fell 24%. All three are down over 35% in 2022.

Market Drivers: Inflation, Interest Rates, and Changing Consumer Behavior

Hopes for the Federal Reserve to raise interest rates, scorching inflation, and uncertainty about the economy have pushed stocks sharply lower from the record levels at which they began the year. Many of the pandemic-era winners have also come crashing back to earth as consumer tastes have shifted since 2020.

Recent earnings seasons have brought high-profile disappointments, contributing to significant one-day stock swings. “We’re transitioning to a higher volatility regime, where fundamentals are going to matter again,” said Aashish Vyas, investment director at Resonanz Capital. “It certainly seems like we’re at a systemic transition.”

FAANG Stocks Lose Over $1 Trillion in Value

The FAANG stocks Facebook-parent Meta Platforms, Apple, Amazon.com, Netflix, and Google-parent Alphabet Inc have lost more than $1 trillion in market value this month, the most since Facebook began trading in May 2012.

Investors are closely monitoring upcoming earnings results for further signs of a slowdown. So far, corporate profits are projected to advance 7% this quarter, according to FactSet, the slowest year-on-year growth since Q4 2020.

Notable Disappointments in Big Tech

• Amazon: Shares dropped 14% on Friday, its biggest one-day decline since at least 2014 and are down 26% for the year after posting its first quarterly loss in seven years.
• Apple: Warned that Covid-19 disruptions in China could impact sales by as much as $8 billion. Shares fell 3.7% on Friday and are down 11% for the year.
• Netflix: Lost subscribers in Q1; shares plunged over 30% in a single day after its earnings report.

Large tech companies significantly influence stock indexes due to their heavy weighting. Rising yields on government bonds such as the 10-year Treasury note hitting 2.885%, its highest monthly gain since December 2009 have made tech stocks, whose returns are long-term, less attractive.

Twitter, Tesla and the Recession Fear Factor

Twitter shares surged 27% in April amid Elon Musk’s acquisition deal, while Tesla shares fell 19%. This volatility reflects broader concerns about a potential recession impacting global markets. The war in Ukraine has driven up commodity prices, intensifying inflation concerns already at a 40-year high.

Jim Paulsen, chief investment strategist at The Leuthold Group, noted, “There’s this huge getting behind recession fears. There's, I think, a lot more fear there than is probably warranted.”

Economic Data and Market Sentiment

Recent GDP data showed economic contraction for the first time since early in the pandemic. Meanwhile, March inflation surged at its fastest pace since 1982, based on the Fed’s preferred gauge. Despite rising prices, US consumer spending rose 1.1% in March, suggesting households are absorbing inflation to some extent.

Some investors see opportunity amid the downturn, noting that many tech stocks now look undervalued. The Nasdaq has fallen 23% from its peak and is trading at 2020 levels.

Global Currency and Bond Market Shifts

Volatility isn’t confined to equities. Global investors are also reacting to significant moves in currency and bond markets. The US dollar has surged while the yen, a traditional safe haven, has fallen to a 20-year low against the dollar. The WSJ Dollar Index has climbed this year amid expectations the Fed will act more aggressively than the eurozone or Japan.