The prospect of a rapid rise in interest rates has hit technology stocks particularly hard. Facebook, Microsoft, Amazon and Alphabet, Google’s parent company, are down more than 10 percent this month, while the tech-heavy Nasdaq Composite, which fell 2.5 percent on Friday, is down more than 9 percent. The index fell 18 percent over the year.
Frequently asked questions about inflation
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What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar won’t go as far tomorrow as it did today. It is usually expressed as the annual change in the price of essential goods and services such as food, furniture, clothing, transportation and toys.
What Causes Inflation? This may be the result of increasing consumer demand. However, inflation can also rise and fall on developments that have little to do with economic conditions, such as E.g. limited oil production and problems in the supply chain.
Is inflation bad? It depends on the circumstances. Rapid price increases mean problems, but moderate price increases can lead to higher wages and job growth.
Can inflation affect the stock market? Rapid inflation usually spells trouble for stocks. Financial assets in general have historically performed poorly during inflationary booms, while tangible assets like houses have held up better.
Investors have also had to contend with supply chain constraints that hamper sales and result in higher prices. In February, Russia’s invasion of Ukraine meant the already fragile global supply chain faced a new challenge as Western countries imposed sanctions on Russia, including a ban on oil imports from the country, causing energy prices to spike.
Oil prices eased on Friday, with futures contracts for June delivery of Brent crude, the international standard, falling 1.7 percent to $106.65 a barrel. Still, the price represents a sharp rise since the beginning of the year when prices were $78.98 a barrel. Oil and commodity prices are expected to remain volatile as the Russian war in Ukraine continues.
And in China, the world’s second-largest economy, Shanghai and more than a dozen other cities went into lockdown in late March to combat the surge in cases of the Omicron variant of the coronavirus. Factories and other workplaces also had to close.
And on Friday, a string of disappointing earnings forecasts added to the downturn.
HCA Healthcare fell 21.8 percent, making its stock the worst performer in the S&P 500 after the company lowered its earnings guidance citing higher labor costs.
“The challenging job market has put pressure on margins as labor costs rose more than expected compared to the first quarter last year,” HCA Healthcare chief executive Samuel Hazen said during a call with investors. “In some situations, labor market challenges also limited our capacities and prevented us from providing hospital services to certain patients.”
Verizon fell 5.8 percent after the company said it lost 36,000 wireless subscribers in the first three months of the year. Gap also fell 18 percent after the company cut its 2022 revenue guidance.
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