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Stock Market News for May 9, 2022

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Wall Street ended lower on Friday, pulled down by declining mega-cap growth stocks. Investors remained apprehensive about an economic downturn despite strong labor market data, as the Fed signaled aggressive interest rate hikes to combat inflation. The 10-year treasury yield hit a four-year high before retreating. All three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.3% or 98.6 points to close at 32,899.37. Twenty-nine components of the 30-stock index ended in the red, while one remained in the green.

The tech-heavy Nasdaq Composite fell 1.4% or 173.03 points to close at 12,144.66 as the tech stocks declined.

The S&P 500 dipped 0.6% or 23.53 points to end at 4,123.34. Eight of the 11 broad sectors of the benchmark index closed in the red.

The Communication Services SPDR (XLC), the Materials Select Sector SPDR (XLB) and the Consumer Discretionary Select Sector SPDR (XLY) lost 2.1%, 1.4% and 1.3%, respectively, while the Energy Select Sector SPDR (XLE) gained 3%.

The fear-gauge CBOE Volatility Index (VIX) was down 3.2% to 30.19. A total of 13.5 billion shares were traded on Friday, higher than the last 20-session average of 12.1 billion. Decliners outnumbered advancers on the NYSE by a 2.49-to-1 ratio. On the Nasdaq, a 3.04-to-1 ratio favored declining issues.

Mega-Cap Growth Stocks Lead The Day’s Losses

Stock movement on Friday was majorly guided by Fed’s plans to increase interest rates in order to rein in the highest inflation in 40 years. Even as Fed Chairman Jerome Powell mentioned that further hikes were not in the cards after Wednesday’s hike of 50 basis points, investors remain concerned that the central bank will not be able to check inflation at the current rates. There have been concerns about a 75 basis point hike in the June meeting. Coupled with the Fed’s plans to take liquidity out of the system, this could lead to a major slowdown of the economy, pushing it to a recession.

Mega-cap growth stocks were the day’s biggest losers as investors considered them riskier in the light of interest rate hikes. Higher interest rates can make growth stocks, like those of the big tech companies, look overvalued compared to their earnings.

This saw stocks like Netflix, Inc. (NFLX - Free Report) and Shopify Inc. (SHOP - Free Report) fall sharply to end the day lower by 3.9% and 8.6%, respectively. Netflix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The 10-year Treasury Yield Hits 4-year High

On Friday, the 10-year Treasury yield rose 6 basis points to close at 3.12%. Earlier in the session, it had touched 3.15%, its highest since 2018. Bond yields move inversely to prices, and the sell-off in the bond market signals investor concerns about a slowdown in economic growth, resulting from the Fed’s monetary policy tightening.

Economic Data

The U.S. Bureau of Labor Statistics reported that the total nonfarm payroll for April increased by 428,000, against a consensus of 395,000. The data for March was revised down to 428,000 from 431,000. The unemployment rate remained at 3.6%, unchanged from March.

The average hourly earnings for all employees rose by 0.3% in April compared to the consensus of 0.4%. The March figures were revised to 0.4% from 0.5%.

The average workweek for all employees on private nonfarm payrolls in April remained unchanged from the prior month at 34.6 hours.

The Fed reported that consumer credit increased at a seasonally adjusted annual rate of 14% to $52.4 billion in March. In February, it had increased at a rate of 10.2%.

Weekly Roundup

Wall Street closed a losing week as all three major indexes finished in red despite starting the period with three straight positive sessions. The Nasdaq Composite, the S&P 500 and the Dow went down 1.5%, 0.2% and 0.2%, respectively, over the week. Investor mood was dominated by concerns about an economic slowdown as Fed announced a 50-basis-point hike in interest rates. There was lingering fear of further rate hikes to combat inflation.


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