Stocks In a Range After Recent Volatility
3:14 pm Wednesday, June 29th, 2022
Today’s session has been volatile into the midday with mixed performances from the major indices. The mega caps are offering relative support to the main indices with more weakness beneath the index surface than meets the eye.
The Invesco Equal Weight ETF (RSP) is down 1.2% while the Vanguard Mega Cap Growth ETF (MGK) currently trades flat. Also, the advance-decline line favors decliners by a greater than 2-to-1 margin at the NYSE and the Nasdaq.
Of the 11 S&P 500 sectors, only the counter-cyclical health care (+0.8%) and consumer staples (+0.5%) sectors trade in the green. Some of the worst performing sectors are the energy (-2.7%), materials (-1.5%), and industrials (-1.1%) sectors which fuels the existing rate hike and growth concern narrative.
On a related note, Cleveland Fed President Mester (FOMC voter) said she would advocate for another 75 basis point rate hike in July if conditions remain the same. Fed Chair Powell for his part acknowledged at an ECB forum that the importance of fighting inflation is worth the risk of slowing economic activity too much, which was another way of saying that it will be challenging for the Fed to achieve a soft landing.
Another area of notable weakness is the PHLX Semiconductor Index, down 2.8%. Its weakness has been exacerbated by downgrades to several components, including Texas Instruments (TXN), courtesy of BofA Securities.
The Treasury market also looks to be reflecting growth concerns today. The 2-yr note yield is down eight basis points to 3.06% and the 10-yr note yield is down ten basis points to 3.10%.
