Nio Inc – ADR (NYSE: NIO) dropped 12% Monday – and
another 4.34% yesterday – and is down close to 30% year-to-date.
stock market rout brings with it a fresh wave of major selling pressure in some
of the buzziest names in the market that in part, helped drive equities to
records in 2021.
downward pressure continued Tuesday.
defined as a high tech stock with a lot of future promise but no profits, yet.
The market has been aggressively selling these types of stocks this past month
as investors bet on lower future returns with interest rates headed higher.
S&P 500 sliding more than 10% from recent records, bears from the likes of
Mizuho International Plc and Bank of America Corp. warn of fresh selling to
come as growth momentum eases just as the Federal Reserve amps up borrowing
“There’s probably more downside over
the next few months as the market adjusts to the reality of the Fed removing
accommodation, earnings slowdown and much less federal stimulus,” said Ed Clissold, the chief U.S.
strategist at Ned Davis Research, who late last year predicted a double-digit
drop in stocks and today is warning of a correction on the order of 20% from
the early January peak.
are coming to terms with a more hawkish Fed that won’t step in to smooth over
every market hiccup. They expect policy makers to plow on with higher rates,
with a quarter-point hike in March and close to a full percentage point rise
for the whole of 2022.
the direction of travel is troublesome for rate-sensitive investing styles.
“We can see this downward pressure
on the equity markets being relatively sticky unless there is a catalyst for a
much less hawkish Fed and general global central bank reaction,” said Peter Chatwell, head of
multi-asset strategy at Mizuho. “The
market stress scenario is what we think is happening now.”
Fears of a
conflict added to concerns that a years-old bubble in tech will finally burst
as the US Federal Reserve puts up interest rates and scales back massive
have benefitted from the long era of cheap money and the rise of remote working
suffered badly ahead of an apparent return to normal life.
the market were underscored by purchasing managers’ index data that showed US
economic activity slowed during January.
investment bank Jefferies said the sell-off may signal markets expect the US
will enter a recession. John Canavan from Oxford Economics said the sell-off
“highlight[s] the risks of an aggressive Fed”.
Open Markets Committee is expected to continue a shift towards tighter policy at
its Wednesday meeting.
deteriorating backdrop is starting to show on quarterly earnings reports, which
have so far served as reassuring beacons against any doomsday predictions.
unprecedented successive jumps in earnings growth, the guidance from S&P
500 companies so far for the months ahead is “disappointing” and the
information offered by managers in earnings calls is “concerning,” according to
a note by Goldman Sachs Group Inc. strategists on Monday.
“The froth is coming out of an
equity market that simply got too extended on valuation,” Mike Wilson, a long-term bear at
Morgan Stanley, wrote Monday.
stretch for U.S. stocks is far from over, with the tech-heavy Nasdaq indexes
poised to fall into bear markets thanks to the Federal Reserve’s newfound zeal
to undercut inflation, according to Jeremy Siegel, finance professor at the
Wharton School of the University of Pennsylvania.
long-time market watcher said he expects more than four interest-rate hikes
this year, a risk that “equities are not really priced for.” He sees a 20%
decline in the Nasdaq 100 from the November record, implying a more than 7%
fall from current levels.
“I don’t think the pain is over
yet,” Siegel said.
A host of
technical signals also suggests that more volatility may be coming. Siegel sees
more fundamental challenges ahead, from the Fed struggling to snuff out price
pressures to the spreading omicron variant undercutting first-quarter economic
Founded in 2014, the company originally operated under the name NextCar,
changing it to NIO Inc in July 2017. In its Chinese form, the name translates
to "Blue Sky Coming," which stems from management's vision of a
future with azure skies absent the pollution from
Raising $1 billion during its initial public offering, NIO debuted as a
publicly traded company on the American market in September 2018. On its first
day of trading, the stock opened at $6, closed at $6.60, and traded as high as
$6.93 for a reasonable pop.
On Sept. 24, 2018, the company achieved a new Guinness World Record when
Chen Haiyi from China ascended the Purog Kangri glacier in Tibet and reached an
altitude of 18,751 feet in the NIO ES8, setting a record for the highest
altitude achieved in an electric car. According to the company, the feat was
meant to demonstrate the EV's prowess in high altitude and extreme cold.
While NIO's vehicles may only be seen on the roads of China, the company
is drawing on talent from a worldwide pool of employees. In San Jose,
California, for example, the company's North America headquarters is home to
more than 500 employees who primarily focus on software development. According
to the company, the London office works on "commercial
Formula E [race car] management, strategic management, and our supercar
development." Nearly 200 employees in the Munich office concentrate on
product and brand design.