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U.S. stock markets closed sharply lower on Friday as market participants remained concerned about a near-term recession in the United States as well as globally. Last week, hawkish statements by the Fed Chairman Jerome Powell dented investors’ confidence on risky assets like equities. All three major stock indexes ended in negative territory. For the week, these indexes finished in red too.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.7% or 219.28 points to close at 33,727.43. Notably, 26 components of the 30-stock index ended in negative territory, while 4 in positive zone. The tech-heavy Nasdaq Composite finished at 13,492.52, declining 1% or 138.09 points due to weak performance of large-cap technology stocks.
The S&P 500 tumbled 0.8% to end at 4,348.33. All 11 broad sectors of the benchmark index closed in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Technology Select Sector SPDR (XLK), the Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) dropped 1.2%,1.5%, 1.1% and 1.1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 4.1% to 13.44. A total of 15.93 billion shares were traded on Friday, higher than the last 20-session average of 11.68 billion. Decliners outnumbered advancers on the NYSE by a 2.39-to-1 ratio. On Nasdaq, a 2.03-to-1 ratio favored declining issues.
Concerns of a Global Recession
Higher interest rate policy across the world to combat inflation has created ruckus in global financial markets. On Jun 14, in his post-FOMC meeting statement, Fed Chairman Jerome Powell said that the central bank has decided to keep the Fed fund rate unchanged at the existing 5-5.25%. The June FOMC marked the first pause of the current interest rate hike cycle after 10 consecutive FOMC meetings.
However, Powell also mentioned that more rate hikes are likely this year. The Fed’s current “dot-plot” shows that the mean expectation of officials is for another 50-basis point raise in the benchmark interest rate. This implies, two more rate hikes of 25 basis points each within 2023.
The terminal interest rate is at present 5.6%, instead of 5.125%, anticipated after the May FOMC meeting. No rate cut is expected this year. The first cut in interest rate may be delayed till 2025. Majority of market participants were expecting the first rate cut in 2024. Last week, in his testimony before the U.S. Congress, Powell reaffirmed his stand that more rate hikes are likely by end- 2023.
Moreover, last week, central banks of the UK, Switzerland, Norway and Turkey raised their respective benchmark lending rates. Market participants are concerned that higher interest rate will hinder economic activities resulting in global economic recession.
Fearing an impending recession, investors opted for safe-haven sovereign bonds instead of risky equities. Consequently, prices of several sovereign bonds spiked and yield declined. The yield on the benchmark 10-Year U.S. Treasury Note fell 6 basis points to 3.737%. The yields on 10-Year UK bond and 10-Year German bond fell more than 10 basis points each.
Weekly Roundup
Last week was a disappointing one for wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – fell 1.7%, 1.45 and 1.4%, respectively. The Nasdaq Composite reversed the trend of an eight-week win. The Dow terminated a three-week winning streak. The S&P 500 ended a five-week winning run. The S&P 500 recorded its worst weekly performance since the week ended Mar 10, 2023. The Nasdaq Composite also posted worst week since March.
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Stock Market News for Jun 26, 2023
U.S. stock markets closed sharply lower on Friday as market participants remained concerned about a near-term recession in the United States as well as globally. Last week, hawkish statements by the Fed Chairman Jerome Powell dented investors’ confidence on risky assets like equities. All three major stock indexes ended in negative territory. For the week, these indexes finished in red too.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.7% or 219.28 points to close at 33,727.43. Notably, 26 components of the 30-stock index ended in negative territory, while 4 in positive zone. The tech-heavy Nasdaq Composite finished at 13,492.52, declining 1% or 138.09 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) after sliding 4.7% in stock price. JD.com currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
The S&P 500 tumbled 0.8% to end at 4,348.33. All 11 broad sectors of the benchmark index closed in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Technology Select Sector SPDR (XLK), the Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) dropped 1.2%,1.5%, 1.1% and 1.1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 4.1% to 13.44. A total of 15.93 billion shares were traded on Friday, higher than the last 20-session average of 11.68 billion. Decliners outnumbered advancers on the NYSE by a 2.39-to-1 ratio. On Nasdaq, a 2.03-to-1 ratio favored declining issues.
Concerns of a Global Recession
Higher interest rate policy across the world to combat inflation has created ruckus in global financial markets. On Jun 14, in his post-FOMC meeting statement, Fed Chairman Jerome Powell said that the central bank has decided to keep the Fed fund rate unchanged at the existing 5-5.25%. The June FOMC marked the first pause of the current interest rate hike cycle after 10 consecutive FOMC meetings.
However, Powell also mentioned that more rate hikes are likely this year. The Fed’s current “dot-plot” shows that the mean expectation of officials is for another 50-basis point raise in the benchmark interest rate. This implies, two more rate hikes of 25 basis points each within 2023.
The terminal interest rate is at present 5.6%, instead of 5.125%, anticipated after the May FOMC meeting. No rate cut is expected this year. The first cut in interest rate may be delayed till 2025. Majority of market participants were expecting the first rate cut in 2024. Last week, in his testimony before the U.S. Congress, Powell reaffirmed his stand that more rate hikes are likely by end- 2023.
Moreover, last week, central banks of the UK, Switzerland, Norway and Turkey raised their respective benchmark lending rates. Market participants are concerned that higher interest rate will hinder economic activities resulting in global economic recession.
Fearing an impending recession, investors opted for safe-haven sovereign bonds instead of risky equities. Consequently, prices of several sovereign bonds spiked and yield declined. The yield on the benchmark 10-Year U.S. Treasury Note fell 6 basis points to 3.737%. The yields on 10-Year UK bond and 10-Year German bond fell more than 10 basis points each.
Weekly Roundup
Last week was a disappointing one for wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – fell 1.7%, 1.45 and 1.4%, respectively. The Nasdaq Composite reversed the trend of an eight-week win. The Dow terminated a three-week winning streak. The S&P 500 ended a five-week winning run. The S&P 500 recorded its worst weekly performance since the week ended Mar 10, 2023. The Nasdaq Composite also posted worst week since March.