The stock market took a sharp dive on Thursday as Wall Street buzzed with rumors about President Joe Biden’s future in the White House race.
The Dow Jones Industrial Average (DJIA) plummeted 533 points, a 1.3% drop. The S&P 500 (SPX) fell by 0.8%, and the Nasdaq Composite (COMP) decreased by 0.7%, according to FactSet data.
Thursday’s decline saw significant losses in high-tech stocks and a drop in the small-cap Russell 2000 index (RUT) after a recent surge.
According to the source, it marked the Dow’s most significant one-day percentage drop since May 23, as per Dow Jones Market Data.
Peter Cardillo, chief market economist at Spartan Capital, commented, “The selloff is long overdue,” pointing to substantial gains in major tech stocks this year.
Adding to the market’s turmoil is the uncertainty around Biden’s re-election bid, with growing speculation about his potential withdrawal.
“I think it’s a foregone conclusion that he’ll drop out,” Cardillo told MarketWatch, predicting Biden’s exit by the weekend’s end.
Earlier this week, major U.S. equity benchmarks were hitting record highs, spurred by a failed assassination attempt on former President Donald Trump. This incident seemed to boost Trump’s chances against Biden in the upcoming November election.
The Nasdaq Composite, already struggling due to talks of increased regulations on tech exports in Washington, faced a 2.9% weekly drop by Thursday.
The S&P 500 was on track for a 1.3% weekly loss, while the Dow was still poised for a 1.7% weekly gain, according to FactSet.
Quincy Krosby, chief global strategist at LPL Financial, noted in an email, “Political uncertainty is adding to the selloff as the market enters a seasonally volatile and difficult two months.”
She highlighted that the Russell 2000’s selloff was dragging the indexes lower, as the Cboe Volatility Index (VIX) – Wall Street’s “fear gauge” – rose.
Additionally, concerns are rising that the Federal Reserve may need to ease interest rates due to a weakening economy and labor market rather than declining inflation, Krosby added.
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Kevin Gordon, a senior investment strategist at Charles Schwab & Co., advised against creating investment strategies based on who might be in the White House.
He pointed out that despite Biden’s green-energy agenda, the S&P 500 energy sector has surged by roughly 116% since Biden’s 2021 inauguration, outperforming tech stocks.
Gordon added, “The irony is that energy was actually one of the worst-performing sectors under Trump, despite his promises to drill more oil in the U.S., which currently has record domestic output.”