China, Fed, the Volkswagen scandal — All of these are leaving investors more dazed and confused than ever.
The Dow tumbled 200 points shortly after Tuesday morning’s opening. The S&P 500 declined 1.3% and the Nasdaq retreated 1.4%.
“Dazed and confused” is the state of markets, according to Tom Stringfellow, chief investment officer at Frost Investment Advisors.
Wall Street is certainly starting to get “Fed” up with lingering confusion and the lack of clarity on when the Fed will lift interest rates from 0% and why it didn’t happen last week.
Top Fed officials have been giving several interviews in media outlets trying to explain the reasoning behind the decision. However, all of it seems to have confused investors even more.
“Investors are still reeling and in a state of confusion in regards the Fed’s outlook for the economy and timeline for normalization,” veteran market watcher Peter Kenny, an independent market strategist and founder of Kenny’s Commentary, wrote in a note.
The Fed decision perplexed investors because it sent mixed signals. The central bank cited global developments (code: China) and market turbulence for keeping rates steady.
Fed chief Janet Yellen mentioned China and global concerns several times when she talked to reporters about the central bank’s decision. Her comments suggested the Fed was placing more weight on market turbulence and China than is historically normal.
Confusion mounted since last week as Fed officials fanned out to explain the decision. Officials including Dennis Lockhart, Jeffrey Lacker and James Bullard sounded more aggressive about raising rates than Yellen, citing recent improvements in the economy.
All of this has left investors scratching their heads.
“Yellen was dovish and yet four of her colleagues on the Fed have come out and sounded more hawkish and no one knows what to expect,” Michael Block, chief strategist at Rhino Trading, wrote in a note to clients.
“The dithering and mixed messages are not bullish or helpful at all. We should remain under pressure here,” Block wrote.
Meanwhile, European stock markets all fell over 2%, weighed down by similar concerns and a massive emissions scandal that is enveloping one of the world’s largest car makers.
Volkswagen stock plunged another 20% in Europe after a breathtaking 17% drop on Monday.
Also in the U.S., biotech stocks remain under pressure following Hillary Clinton’s promise to take on alleged “price gouging” by drug makers.
The iShares Nasdaq Biotechnology ETF slid nearly 2% after tumbling 5% on Monday.