The performance of the US stock market is evident by two main indicators. First, the charts or graphs represent the performance of the shares of different companies. Second, the market news forms the basis for bearish or bullish sentiments among investors.
During the end of the trading day on 13th March, the Dow Jones Industrial Average capped at 31,819.4, witnessing a 0.28% reduction from the start of the day. The recent fall in the US stock market graph can be attributed to the fall of Silicon Valley Bank.
The banking stocks in the market are especially vulnerable following the fall of the Silicon Valley bank, once hailed as the 16th largest commercial bank in the US. The sudden collapse stemmed from earlier decisions of the bank when it invested millions into US government bonds at the time of low-interest rates.
In 2023, inflation plagued the US economy, and the Federal Government has been forced to hike interest rates. Since the bond price and interest rates are inversely proportional, the millions that Silicon Valley invested in governmental bonds suffered and depreciated in value.
Adding to the growing concerns of the bank was a flurry of customers withdrawing their funds to deal with inflation. Most of the customers of Silicon Valley Bank were owners of tech startups, and the inflation made it challenging for them to secure capital funding. Hence, they were compelled to withdraw their balance in large numbers.
This sudden fall of Silicon Valley Bank led to a 60% decrease in the US stock market on Thursday.
Although the events of last week had left investors apprehensive about the banking sector, this week’s trading sessions started well. After suffering heavy losses, the futures contracts displayed a better performance on Monday, with all three major indexes of the market showcasing a 0.2% increase.
However, the regular trading sessions still suffered losses. According to the US stock chart, the Dow Industrial Average fell by 0.28%, and S&P 500 fell by 0.15%. On the other hand, the Nasdaq composite increased by 0.45%.
While the collapse of Silicon Valley Bank has been disastrous, it has also led to hopes that the monetary policy will be less stringent.
The Federal Government will soon publish a customer price index (CPI) or a key inflation report. It will highlight the trends in the price of commodities and establish if the country is still amidst inflation.
Given that it will be the last crucial economic report before the Federal Government analyses the monetary policy, looking forward to the results is a good idea. These findings will decide the investor sentiments in the market.
If the CPI is too high, the Federal Government may hike interest rates, leading investors to sell off their equities and choose fixed-income instruments to safeguard their money.
The US stock market graph undergoes several fluctuations every day. This is especially true now due to the rise of inflation and the collapse of major banking institutions in the country. But as long as you identify the trends in the market and get an idea about investor sentiments, you can successfully build a portfolio of US stocks.
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The current value of the US market can be defined in terms of its total market capitalisation, which is a whopping $40,511,838.8 million.
In the past year, Dow Jones has been known to provide a return of -5.14%. Hence, the top 30 blue chip companies in the stock market have not been performing as expected.