Stocks Extend Losses on Recession Worries

2:38 pm Tuesday, December 06th, 2022

The stock market traded with a negative disposition, building on yesterday’s losses. The S&P 500 got rejected at the 4,000 level right out of the gate and recently fell below last Tuesday’s closing level (3,957.63), retracing all the gains registered since Fed Chair Powell’s speech.

Concerns about the global economy and 2023 earnings growth prospects are fueling today’s sell off, along with the market’s technical deterioration.

The growth concerns are emanating in part from cautious-sounding remarks to CNBC about consumers and/or the economic outlook from the CEOs of JPMorgan Chase (JPM), Walmart (WMT), and Union Pacific (UNP), and a deepening inversion along the Treasury yield curve.

The 2-yr note yield is up one basis point to 4.39% and the 10-yr note yield is down three basis points to 3.57%.

Growth stocks are particularly weak today, feeling the added pinch perhaps of tax-loss selling efforts. The Russell 3000 Growth Index is down 1.6% versus a 1.1% loss in the Russell 3000 Value Index.

Another spot of notable weakness is the mega cap stocks. The Vanguard Mega Cap Growth ETF (MGK) is down 1.8% versus a 1.2% loss in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.4% loss in the S&P 500.

All 11 S&P 500 sectors trade down with losses ranging from 0.1% (utilities) to 2.2% (energy). The latter is pressured by declining oil prices. WTI crude oil futures are down 3.6% to $74.16/bbl, reflecting the market’s angst about the potential for waning demand in a slower growth environment/recession.

Today’s economic data was limited to the October Trade Balance, which showed that the deficit widened in October to $78.2 billion (Briefing.com consensus -$77.2 billion) from a downwardly revised $74.1 billion (from -$73.3 billion) in September. That was the result of exports being $1.9 billion less than September exports and imports being $2.2 billion more than September imports.

The key takeaway from the report is that the pickup in imports speaks to a relatively strong U.S. economy in October versus other economies.