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Wall Street routed on Tuesday on concerns of higher interest rate and a possible near-term recession. All three major stock indexes recorded their worst single-day decline in 2023 and biggest daily slid since Dec 15, 2022. Market participants’ confidence on risky assets like equities has dented significantly.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 2.1% or 697.1 points to close at 33,129.59. Notably, 29 components of the 30-stock index ended in negative territory and just one in positive zone. The tech-heavy Nasdaq Composite finished at 11,492.230 sliding 2.5% or 294.97 points due to weak performance of large-cap technology stocks.
The S&P 500 tanked 2% to end at 3,997.34, marking the first closing of the broad-market index below the technical barrier 4,000 since Jan 20. All 11 broad sectors of the benchmark index closed in negative territory.
The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC), the Industrials Select Sector SPDR (XLI), the Financial Select Sector SPDR (XLF) and the Technology Select Sector SPDR (XLK) fell 3.3%, 2.2%, 2.3%, 2.1% and 2.4%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 7.7% to 22.87. A total of 11 billion shares were traded on Tuesday, lower than the last 20-session average of 11.6 billion. The S&P 500 posted two new highs and one new low while the Nasdaq Composite recorded 57 new highs and 112 new lows.
Higher Rate Regime Likely to Extend
The fears of higher interest rate hikes were fueled following comments from St. Louis Federal Reserve President James Bullard. He said that he had proposed a 50-basis point rate hike in the Fed’s last meeting and such a hike could be expected in the March meeting. Bullard’s sentiments were echoed by Cleveland Fed President Loretta Mester, saying that she also supports a steeper rate hike in the next meeting, which further weighed on stocks.
On Feb 17, Federal Reserve Governor Michelle Bowman said “I think there’s a long way to go before we reach our 2% inflation objective and I think we’ll have to continue to raise the federal funds rate until we see a lot more progress on that.”
Government Yield Curve Inversion
On Feb 21, fearing prolonging higher interest rate regime, the ICE dollar Index rose 0.14% to 104.10 after gaining 0.25% last week. The yield on the benchmark 10-Year U.S. Treasury Note rose 12.6 basis points to close at 3.953%, marking its highest since November 2022. The yield on the short-term 2 Year U.S. Treasury Note climbed to 4.729%, its highest since 2007.
The shape of the yield curve between 2-Year and 10-Year Notes remained inverted for last three months. A section of economists and financial experts are considering this trend as a signal for a possible near-term recession.
Economic Data
The National Association of Realtors reported that existing home sales fell 0.7% in January to a seasonally adjusted annual rate of 4 million units, marking the lowest level since October 2010. The consensus estimate was 4.09 million units. December’s data was reported upward to 4.03 million units from 4.02 million units reported earlier. However, the pace of decline has slowed in January indicating the housing slump may reached its bottom.
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Stock Market News for Feb 22, 2023
Wall Street routed on Tuesday on concerns of higher interest rate and a possible near-term recession. All three major stock indexes recorded their worst single-day decline in 2023 and biggest daily slid since Dec 15, 2022. Market participants’ confidence on risky assets like equities has dented significantly.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 2.1% or 697.1 points to close at 33,129.59. Notably, 29 components of the 30-stock index ended in negative territory and just one in positive zone. The tech-heavy Nasdaq Composite finished at 11,492.230 sliding 2.5% or 294.97 points due to weak performance of large-cap technology stocks.
The major loser of the tech-laden index was JD.com Inc. (JD - Free Report) , shares of which plunged more than 11%. JD.com currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 tanked 2% to end at 3,997.34, marking the first closing of the broad-market index below the technical barrier 4,000 since Jan 20. All 11 broad sectors of the benchmark index closed in negative territory.
The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC), the Industrials Select Sector SPDR (XLI), the Financial Select Sector SPDR (XLF) and the Technology Select Sector SPDR (XLK) fell 3.3%, 2.2%, 2.3%, 2.1% and 2.4%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 7.7% to 22.87. A total of 11 billion shares were traded on Tuesday, lower than the last 20-session average of 11.6 billion. The S&P 500 posted two new highs and one new low while the Nasdaq Composite recorded 57 new highs and 112 new lows.
Higher Rate Regime Likely to Extend
The fears of higher interest rate hikes were fueled following comments from St. Louis Federal Reserve President James Bullard. He said that he had proposed a 50-basis point rate hike in the Fed’s last meeting and such a hike could be expected in the March meeting. Bullard’s sentiments were echoed by Cleveland Fed President Loretta Mester, saying that she also supports a steeper rate hike in the next meeting, which further weighed on stocks.
On Feb 17, Federal Reserve Governor Michelle Bowman said “I think there’s a long way to go before we reach our 2% inflation objective and I think we’ll have to continue to raise the federal funds rate until we see a lot more progress on that.”
Government Yield Curve Inversion
On Feb 21, fearing prolonging higher interest rate regime, the ICE dollar Index rose 0.14% to 104.10 after gaining 0.25% last week. The yield on the benchmark 10-Year U.S. Treasury Note rose 12.6 basis points to close at 3.953%, marking its highest since November 2022. The yield on the short-term 2 Year U.S. Treasury Note climbed to 4.729%, its highest since 2007.
The shape of the yield curve between 2-Year and 10-Year Notes remained inverted for last three months. A section of economists and financial experts are considering this trend as a signal for a possible near-term recession.
Economic Data
The National Association of Realtors reported that existing home sales fell 0.7% in January to a seasonally adjusted annual rate of 4 million units, marking the lowest level since October 2010. The consensus estimate was 4.09 million units. December’s data was reported upward to 4.03 million units from 4.02 million units reported earlier. However, the pace of decline has slowed in January indicating the housing slump may reached its bottom.