Stock market performance
The instability in Monday’s trading session impacted International Business Machines (IBM) stock. After the market closed, the S&P 500 and the tech-heavy Nasdaq index fell 1.4% and 2.1%, respectively. International Business Machines (IBM) also felt the heat and fell 1.8%, which is more than the S&P 500.
Investment restriction causing a ripple effect
The ongoing trade war between China and the United States took a new turn on Monday when President Trump put an additional import restriction of 10% on $200 billion of Chinese goods and limited China’s investments in US technology companies. Chinese companies are not allowed to invest more than 25% in any US technology company. It is an effort to protect the intellectual property of US tech assets.
Earlier, on March 22, the Trump administration imposed tariffs on up to $60 billion of Chinese goods.
Other factors causing a decline
According to most analysts, the US market looks overvalued. The stocks of most companies are trading either near their 52-week highs or have set new record levels. The PE ratio of the S&P 500 is already at an eight-year high of 25.0x.
The US ten-year bond yield also increased significantly to 2.9%, fueled by a strong economic scenario. The Fed’s recent hike in interest rates may also impact the overall stock market. The higher rates will make stocks look less attractive to investors compared to higher bond yields.