Stocks Fall For 4th Straight Session On Fed Outlook
3:05 pm Wednesday, August 31st, 2022
U.S. stocks were lower for a fourth straight session on Wednesday and were poised for their weakest August performance in seven years as worries about aggressive interest rate hikes from the Federal Reserve persist.
A general lack of conviction on either side of the tape is reflected by market breadth. Decliners lead advancers by an 11-to-10 margin at the NYSE and a barely greater than 1-to-1 margin at the Nasdaq.
The Vanguard Mega Cap Growth ETF (MGK), the Invesco S&P 500 Equal Weight ETF (RSP), and the S&P 500 all trade around the flat line, further reflecting a lack of conviction today.
One specific bright spot is the communication services sector (+0.9%), which sits atop the leaderboard. Meta Platforms (META), which is drafting off Snap’s (SNAP) better than expected revenue guidance and likely benefiting from some month-end buying interest in a beaten-up mega-cap stock, helps fuel sector performance. Netflix (NFLX) is another winning standout for the group after AdAge reported that two Snap executives are leaving to lead Netflix’s ad business.
Meanwhile, the information technology sector (-0.3%) shows relative weakness despite gains in PayPal (PYPL) after it received an upgrade to Buy from Neutral at BofA Securities. Losses in HP Inc (HPQ) and Seagate Technology (STX) are limiting sector performance. The former issued disappointing EPS guidance with its earnings report while the latter lowered prior Q1 EPS guidance.
Energy complex futures are mixed with WTI crude oil futures down 0.7% to $90.96/bbl while natural gas futures are up 0.3% to $9.07/mmbtu.
Treasury yields are also mixed with the 2-yr note yield down one basis point to 3.44% while the 10-yr note yield is up one basis point to 3.12%.
Separately, Cleveland Fed President Mester (FOMC voter) said today that she thinks the fed funds rate will be somewhat above 4.00% by early next year and that she does not anticipate a rate cut in 2023.
