U.S. markets and stock ETFs were stuck in sideways action Monday as gains were pared down on renewed concerns over a global slowdown.
On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) fell 0.4%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was down 0.1% and SPDR S&P 500 ETF (NYSEArca: SPY) slipped 0.1%.
Investors took a second look at the recent string of disappointing economic data, which may have potentially signaled the start of a deeper downturn.
“There’s a pretty obvious weakness in growth and markets need to come to terms with that,” James Athey, senior investment manager at Aberdeen Standard Investments, told the Wall Street Journal.
Weak factory data from the United States, Europe and Japan on Friday triggered a steep sell-off in U.S. equities, also leading to the inversion of U.S. Treasury yield curve for the first time since 2007 as investors turned to safe-haven bets, Reuters reports. An inverted yield curve has historically preceded previous recessions.
“Earnings and rates drive the markets and we are in a position where the rates are falling and the Fed has basically told you that the economy is slowing down, so you have to be wary of earnings,” Dave Ellison, portfolio manager at Hennessy Funds, told Reuters.
Among the worst off, growth-oriented tech names were taking a beating in light of the shift in risk sentiment.
“Tech stocks are being hit due to a slowing economy and people don’t want to pay a high price for an industry whose growth is probably slowing,” Ellison added.
The Federal Reserve last week decided not to hike benchmark interest rates this year after reassessing the U.S.’s growth outlook.
“We’ve become accustomed to the market greeting dovish central bank turns with a bounce. Not now. The market wonders: What if the Fed is seeing something that we are not?” Athey added.
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