Stocks Tank as Growth Concerns in Focus
3:32 pm Thursday, June 09th, 2022
US stocks fell for a second day as investors focused on growth concerns after Europe’s central bank became the latest to signal restrictive policies to combat inflation. The dollar gained.
The picket line so to speak appears situated around tomorrow’s Consumer Price Index, which promises to be a market-moving release given the fresh perspective it will offer on inflation trends and the likely course of monetary policy. Buyers, it seems, just haven’t been all that willing to cross the line so far.
Their reluctance has been helped along by the policy directive out of the European Central Bank (ECB). Prior to the open, the ECB left its key interest rates unchanged, as expected. The directive, though, included a signal that the Governing Council expects to raise its key rates by 25 basis points at the July meeting and to follow suit with additional rate hikes in September and beyond. Also, it was determined that the ECB’s net asset purchase program will end on July 1.
In conjunction with the policy decision, the ECB shared an updated projection for the annual inflation rate, which it now expects to be 6.8% in 2022 (up from prior 5.1%) and 3.5% in 2023 (up from prior 2.1%).
The collective communication from the ECB served as a fresh reminder that high inflation is a universal problem and that most of the world’s leading central banks are shifting to a hawkish-minded policy bias that will curtail growth prospects.
That reminder took some steam out of the futures market before the open and it translated into a relatively weak start to today’s session that knocked the S&P 500 below 4100.
The S&P 500 has danced around that mark to this point, tripped up by a lack of convincing leadership and ongoing growth concerns that were piqued by reports that indicated a southwest district in Shanghai had been locked down for COVID testing and that entertainment venues in a Beijing district have been closed amid COVID concerns.
The consumer discretionary (+0.3%) and consumer staples (+0.3%) sectors have exhibited relative strength throughout the day, with Tesla (TSLA), which was upgraded by UBS to Buy from Neutral, Home Depot (HD), Costco (COST), and Walmart (WMT) providing influential support in those respective spaces.
Still, the advance-decline line tells the more complete story for the market. Declining issues lead advancing issues by a nearly 3-to-1 margin at the NYSE and by a better than 2-to-1 margin at the Nasdaq.
The 10-yr note yield is up three basis points to 3.05%. The U.S. Dollar Index is up 0.5% to 103.00. WTI crude futures are down 0.5% to $121.51/bbl.
Initial jobless claims for the week ending June 4 increased by 27,000 to 229,000 (consensus 208,000) while continuing claims for the week ending May 28 were unchanged at 1.306 million.
