Wall Street Staggers With ‘Vicious’ $1.3 Trillion Stock Selloff

New York (May 5) -- A day after celebrating the Federal Reserve’s signal that it wouldn’t be making any jumbo-sized moves, traders woke up on Thursday deciding that the central bank will struggle to fight high inflation amid the lingering threat of a recession.

In a sharp about-face, investors sold stocks, bonds and cryptocurrencies on Thursday. At one point, the S&P 500 Index lost 4.2%, the most since June 2020, and the tech-heavy Nasdaq 100 dropped 5.7%, the most since March of that year.

“The great puking that’s happening? I didn’t expect that,” Kim Forrest, founder and chief investment officer at Bokeh Capital Partners said by phone. “We live for the days where we’ve made people money -- that’s our job -- and it’s cold comfort that I’m losing people less money.”

Speculative corners of the market were among the hardest hit, with an index of expensive software stocks sliding more than 10%, the most since mid-March 2020. An ETF tracking newly public companies lost 9% at one point, while non-profitable tech firms lost roughly 11%, as Bitcoin -- the largest cryptocurrency -- dropped by the same amount to below $36,000.

“There’s still a lot of fear out there,” said Dennis Dick, head of markets structure and a proprietary trader at Bright Trading. “People thought yesterday was the green light, but now they’re getting caught again. Retail traders keep coming in and getting chopped up. The contrarians have been winning 2022.”

“The only thing that will lead to a sustained turnaround is if we see inflation start to not look so hot,” he added. “Any rally that isn’t on improving inflation is a sucker’s rally.”