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Wall Street closed lower on Monday, dragged down by mega-cap growth stocks. Investors continued to be apprehensive that the Fed might reconsider its recent dovish stance and delay its plan of cutting interest rates. An important government official suggested that the economy would possibly avoid recession. Yield on the U.S. 10-year treasury note increased significantly. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.1% or 34.99 points to close at 33,891.02. Eighteen components of the 30-stock index ended in negative territory, while 12 ended in positive.
The S&P 500 lost 0.6% or 25.40 points to close at 4,111.08. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Technology Select Sector SPDR (XLK), the Communication Services Select Sector SPDR (XLC) and the Materials Select Sector SPDR (XLB) slid 1.2%, 1.2% and 1.1%, respectively, while the Utilities Select Sector SPDR (XLU) advanced 0.9%.
The tech-heavy Nasdaq declined 1% or 119.51 points to finish at 11,887.45.
The fear-gauge CBOE Volatility Index (VIX) was up 6% to 19.43. A total of 11.7 billion shares were traded on Monday, lower than the last 20-session average of 11.9 billion. Decliners outnumbered advancers on the NYSE by a 3.37-to-1 ratio. On the Nasdaq, a 1.98-to-1 ratio favored declining issues.
Investors Remain Worried About Health of Economy
After an encouraging January rally and clear signs emerging from the Fed that it was on the path to loosen its grip on the monetary policy, strong labor market numbers from late last week have suddenly created an uncomfortable stir among market participants. A robust labor market and historically low unemployment would usually keep investor mood upbeat. But the present situation is making them second-guess the Fed’s future policy moves.
The market continued the sell-off mode on Monday, in line with its Friday woes. Investors believe it is very likely that the central bank might take cognizance of the strong labor market numbers and infer that further tightening of monetary policy is the need of the hour. This would delay the possible rate cuts or pause rate hikes that investors have been banking on in recent weeks and on the contrary, would further worsen the situation with higher rates.
Market participants are worried that if the Fed turns hawkish again, a soft landing of the economy may not be achieved, and are awaiting clear communication from the Fed that these turn of events have not deterred them from the recent dovish stance they have taken up. Mega-cap growth stocks, like tech stocks, usually do the worst when trade happens on recession fear, because their current valuation looks much higher than their future prospects.
U.S. Treasury Secretary Janet Yellen said on Monday that with inflation coming down significantly and the labor market remaining strong, she could see the United States avoiding recession. "You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years," Yellen said in an interview, "What I see is a path in which inflation is declining significantly and the economy is remaining strong."
Yellen acknowledged that inflation is still too high, but it has been falling for the past six months and could decline significantly in the coming days based on government measures. This brought some good news to the market on an otherwise gloomy day of trade.
Treasury Yields Rise on Recession Fear
The 10-year treasury yield climbed on Monday as investors weighed in chances of the economy entering a recession in the coming months. The yield on the benchmark treasury note was up by nearly 12 basis points at 3.651%. Monday marked the first time it rose above 3.6% since Jan 11. Even more significant was the rise in the 2-year treasury yield, which climbed steeply for the second day in a row and traded at 4.485%, having risen 18 basis points.
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Stock Market News for Feb 7, 2023
Wall Street closed lower on Monday, dragged down by mega-cap growth stocks. Investors continued to be apprehensive that the Fed might reconsider its recent dovish stance and delay its plan of cutting interest rates. An important government official suggested that the economy would possibly avoid recession. Yield on the U.S. 10-year treasury note increased significantly. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.1% or 34.99 points to close at 33,891.02. Eighteen components of the 30-stock index ended in negative territory, while 12 ended in positive.
The S&P 500 lost 0.6% or 25.40 points to close at 4,111.08. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Technology Select Sector SPDR (XLK), the Communication Services Select Sector SPDR (XLC) and the Materials Select Sector SPDR (XLB) slid 1.2%, 1.2% and 1.1%, respectively, while the Utilities Select Sector SPDR (XLU) advanced 0.9%.
The tech-heavy Nasdaq declined 1% or 119.51 points to finish at 11,887.45.
The fear-gauge CBOE Volatility Index (VIX) was up 6% to 19.43. A total of 11.7 billion shares were traded on Monday, lower than the last 20-session average of 11.9 billion. Decliners outnumbered advancers on the NYSE by a 3.37-to-1 ratio. On the Nasdaq, a 1.98-to-1 ratio favored declining issues.
Investors Remain Worried About Health of Economy
After an encouraging January rally and clear signs emerging from the Fed that it was on the path to loosen its grip on the monetary policy, strong labor market numbers from late last week have suddenly created an uncomfortable stir among market participants. A robust labor market and historically low unemployment would usually keep investor mood upbeat. But the present situation is making them second-guess the Fed’s future policy moves.
The market continued the sell-off mode on Monday, in line with its Friday woes. Investors believe it is very likely that the central bank might take cognizance of the strong labor market numbers and infer that further tightening of monetary policy is the need of the hour. This would delay the possible rate cuts or pause rate hikes that investors have been banking on in recent weeks and on the contrary, would further worsen the situation with higher rates.
Market participants are worried that if the Fed turns hawkish again, a soft landing of the economy may not be achieved, and are awaiting clear communication from the Fed that these turn of events have not deterred them from the recent dovish stance they have taken up. Mega-cap growth stocks, like tech stocks, usually do the worst when trade happens on recession fear, because their current valuation looks much higher than their future prospects.
Consequently, shares of Intel Corporation (INTC - Free Report) and Activision Blizzard, Inc. slid 4.2% and 4.9%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Treasury Secretary Remains Optimistic
U.S. Treasury Secretary Janet Yellen said on Monday that with inflation coming down significantly and the labor market remaining strong, she could see the United States avoiding recession. "You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years," Yellen said in an interview, "What I see is a path in which inflation is declining significantly and the economy is remaining strong."
Yellen acknowledged that inflation is still too high, but it has been falling for the past six months and could decline significantly in the coming days based on government measures. This brought some good news to the market on an otherwise gloomy day of trade.
Treasury Yields Rise on Recession Fear
The 10-year treasury yield climbed on Monday as investors weighed in chances of the economy entering a recession in the coming months. The yield on the benchmark treasury note was up by nearly 12 basis points at 3.651%. Monday marked the first time it rose above 3.6% since Jan 11. Even more significant was the rise in the 2-year treasury yield, which climbed steeply for the second day in a row and traded at 4.485%, having risen 18 basis points.