With many of the world’s major central banks rapidly raising interest rates, the major U.S. stock indexes fell for the fifth time in six weeks to levels near year-to-date lows. The latest losses of around 4% to 5% were similar in scale to the previous week’s steep declines.
As of last Friday,$DJIA(.DJI)$ YTD is -17.3%, $NASDAQ(.IXIC)$ YTD is -30.1%, $S&P 500(.SPX)$ YTD is -21.6%. $Straits Times Index(STI.SI)$ and $S&P/ASX 200(XJO.AU)$‘s YTD performances are2.61% & -11.68% respectively.
All central banks are sending the same tone: they will try to control inflation no matter what. The Fed has set the tone very clearly...no matter what pain the economy suffers, they will keep raising rates.
The $Cboe Volatility Index(VIX)$ briefly topped 30 as risk aversion intensified. Throughout the year, when the VIX rises above that level, the U.S. stock benchmark hit a short-term low, according to DataTrek Research.
Macro Factors to Watch
Fed's Bitter Medicine: the U.S. Federal Reserve sought to keep inflation in check by approving a 0.75 percentage point increase in its benchmark interest rate. The move pushed the rate to a range of 3.00% to 3.25%—a level last seen in 2008. Fed officials projected they would lift the rate by at least another 1.25% over the last two meetings of this year.
Anxiety Rises: An index that measures investors’ expectations of short-term U.S. equity market volatility jumped about 14% for the week, climbing to the highest level since June. The Cboe Volatility Index was up more than 50% from a recent low in mid-August.
Cumulative Losses:Since mid-August, the NASDAQ has tumbled more than 17%, the S&P 500 has dropped about 14%, and the Dow has fallen more than 13%. The indexes are all close to their levels of mid-June, prior to the rally that had sent stocks higher through much of the early summer.
Sectors & Stocks Performances Review:
The 11 sectors of the S&P 500 were wiped out. The energy sector closed down 9.12% amid global recession fears, the Consumer Cyclical sector fell about7.5%, the Real Estate fell by more than 6.64%, and the Basic Material, Financial, Communication Services, Industrials, Healthcare, Technology fell over 4%~5%, the Consumer Defensive closed down 2.75% with the smallest decline.
Weekly Top Gainers of S&P 500：
$General Mills(GIS)$ , $Kellogg(K)$ , $Allegion PLC(ALLE)$ , $Hormel(HRL)$ , $Campbell Soup(CPB)$ ,$Hershey(HSY)$ ,$Lennar(LEN)$ ,$ConAgra(CAG)$ , $Lamb Weston Holdings, Inc.(LW)$ , $Smucker's(SJM)$ .
Large technology stocks generally fell, $Tesla Motors(TSLA)$ fell more than 4%, $Amazon.com(AMZN)$ fell nearly 3%, $AMD(AMD)$ , $Intel(INTC)$ fell more than 2%, $Apple(AAPL)$ , $Microsoft(MSFT)$ , $Alphabet(GOOG)$ fell more than 1%.
Oil and gas and non-ferrous metal sectors were among the top losers, with $BP PLC(BP)$ down over 8%, $Chevron(CVX)$ , $Total SA(TTE)$ , and$Century Aluminum(CENX)$ down over 6%, and $Occidental(OXY)$ down over 5%.
$Boeing(BA)$ fell more than 5 percent as it will pay $200 million to settle allegations it misled investors after two deadly crashes of its 737 MAX jets.
Other Markets
Dollar and Gold: The strong dollar once again refreshed a new 20-year high. Although the Sino-Russian-Ukrainian war and the Fed’s interest rate hike expectations go in the opposite direction, the power of the trend must be respected. Gold will continue to decline next week
Soaring Yields: the yield of the 10-year U.S. Treasury bond climbed for the eighth week in a row. The yield is up from 3.45% at the end of the previous week and from 2.64% at the end of July. The inversion of the yield curve became more pronounced, as the 2-year Treasury yield rose to about 4.20%—the highest since 2007.
Another U.K. Rate Hike: The United Kingdom’s central bank, the Bank of England, raised its benchmark lending rate from 1.75% to 2.25%—a level last seen in 2008. It marked the seventh meeting in a row at which the bank has lifted rates.
Sub-$80 Oil: With recessionary fears growing, the price of U.S. crude oil dropped around 7% for the week, slipping below the $80-per-barrel mark for the first time since early January. As recently as early June, oil briefly traded above $120.
The week ahead: September 26-30
Monday
- No major reports scheduled
Tuesday
- S&P/Case-Shiller 20-City Composite Home Price Index
- New home sales, U.S. Census Bureau
- Consumer Confidence Index, The Conference Board
- Durable goods orders, U.S. Census Bureau
Wednesday
- Pending home sales, National Association of Realtors
- Wholesale inventories, U.S. Census Bureau
Thursday
- Second-quarter GDP, third estimate, U.S. Bureau of Economic Analysis
- Weekly unemployment claims, U.S. Department of Labor
Friday
- Personal Consumption Expenditures Price Index, U.S. Bureau of Economic Analysis
- University of Michigan Index of Consumer Sentiment
- Personal income and consumer spending, U.S. Bureau of Economic Analysis
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