S&P 500 index dips as private credit risks escalate

The decline happened as concerns about the $1.8 trillion private credit industry escalated. These concerns started earlier this month after Blue Owl, a company with over $300 billion in assets under management, sent shockwaves in the broader market.

Blue Owl sold a private credit portfolio and announced measures to limit redemption by its investors. This move was an escalation to what happened last year when the company attempted to merge a private and public fund.

The crisis escalated this week after a fund managed by Apollo Asset Management slashed its dividend in a bid to preserve cash as defaults rose.

As a result, top private credit and equity companies like Blue Owl, Apollo, Ares, and Blackstone continued falling. Blue Owl stock dropped by over 4.3%, bringing its three-month decline to 25%.

Apollo Global Managements stock dropped by over 7%, while Ares fell by over 6%. Blackstone and KKR stocks also continued falling.

The S&P 500 Index also dropped as odds of a US attack on Iran jumped after Israels embassy asked non-essential staff to leave. As a result, airline stocks like United Airlines, Delta Airlines, and American Airlines were among the top laggards in the S&P 500 Index.

Additionally, the index retreated after the US published strong producer price index (PPI) data.

The report showed that the headline PPI rose by 2.9% in January, while the core PPI moved to 3.6%. These numbers mean that the Federal Reserve may find it difficult to cut interest rates in the coming meetings.