Stocks End Lower In Volatile Session As Tech Stocks Fall
2:51 pm Tuesday, October 11th, 2022
US stocks ended lower as investors snapped up some beaten-down shares, but volatility was high ahead of U.S. inflation data and the start of third-quarter earnings later this week.
The latter came to light with the Bank of England (BoE) intervening again in the UK gilt market after a nasty selloff yesterday that completely undid the gains registered after the BoE announced its emergency gilt purchase operation on September 28. Today, the BoE said it is going to buy index-linked gilts from October 11 until October 14 to mitigate dysfunction in the market and prevent “fire-sale” dynamics.
That news helped stop the bleeding in gilts and provided a boost for the British pound (GBP/USD ) that is weighing on the U.S. Dollar Index along with strength in the euro today (EUR/USD).
The slowdown concerns stemmed from reports that China is imposing new restrictions in some Chinese cities because of rising COVID cases. Also, the IMF lowered its 2022 global growth forecast to 2.7% from 2.9% and said “The worst is yet to come.”
Notably, the S&P 500 broke down to a new low for the year (3,568.45) shortly after the open, yet selling pressure abated at roughly the same time the U.S. Dollar Index rolled over. It was then that buyers re-emerged to help pare today’s losses, and what began as a down day, has evolved into a trend-up day with broad-based participation in the rebound effort.
It has also helped that Treasury yields have come down noticeably from their overnight highs as well, particularly the 10-yr note yield, which kissed 4.00%. It has since backed down to 3.89% while the 2-yr note yield, which hit 4.34%, sits at 4.28%.
The 2-yr note yield has not reacted at all really to Cleveland Fed President Mester (FOMC voter) saying in a speech that monetary policy is moving into restrictive territory and needs to stay there for some time or to her position that she thinks the bigger risk at this point, given current economic conditions and the outlook, is tightening too little and allowing very high inflation to persist and become embedded in the economy.
Those remarks took a little energy away from the stock market’s rebound run, but it nonetheless regrouped and the major indices are sitting near their best levels of the day.
Before today’s open, it was reported that the September NFIB Small Business Optimism Index rose to 92.1 from 91.8 in August. There was no other U.S. economic data of note today.
