Stocks Slump Again As Recession Fears Mount
3:21 pm Friday, September 23rd, 2022
Today’s trade has a decidedly negative disposition as market participants weigh concerns about rising interest rates and a hard landing. The volatile moves in the Treasury market, in conjunction with deteriorating macro conditions, continue to pressure investor sentiment.
Aggressive selling in the Treasury market has been a major headwind today. It’s not just the level yields have risen to, but how quickly they’ve moved up that’s concerning. The 2-yr note yield rose as high as 4.26% (it began the week at 3.85%) and the 10-yr note yield went as high as 3.82% (it began the week at 3.45%). They currently stand at 4.17% and 3.66%, respectively.
A policy move out of the UK has acted as another headwind today. The Prime Minister announced the biggest package of tax cuts since 1972 in order to help drive stronger economic growth. That news has pushed the 10-yr UK gilt yield up 33 basis points to 3.82%, as market participants recognize it will be financed through the issuance of more debt at a time of rising interest rates. Separately, there is concern that it will ultimately keep inflation elevated.
The stock market sell-off today has been broad based. The S&P 500 is down 2.1% versus a 2.3% loss in the Invesco S&P 500 Equal Weight ETF (RSP) and a 1.9% loss in the Vanguard Mega Cap Growth ETF (MGK).
Every S&P 500 sector trades in the red with losses ranging from 1.4% (real estate) to 6.7% (energy). The latter is the worst performer by a wide margin due to falling oil prices that are a byproduct of demand concerns stemming from a slowdown in global growth. WTI crude oil futures are down 5.6% to $78.82/gal.
The advance-decline line reflects strong conviction on the sell side. Decliners outpace advancers by a 14-to-1 margin at the NYSE and a nearly 6-to-1 margin at the Nasdaq.
Notably, small and mid cap stocks are faring worse than their peers. The Russell 2000 (-3.4%) and the S&P Mid Cap 400 (-3.1%) show the steepest losses.
Today’s economic data was limited to the preliminary September IHS Markit Manufacturing PMI reading, which came in at 51.8 (prior 51.5), and IHS Markit Services PMI reading, which was 43.7 (prior 43.7).
