Stocks Tank On Recession Fear

2:26 pm Thursday, December 15th, 2022

It’s been a disappointing day so far for the stock market as lingering concerns about central banks raising rates into a deteriorating global economic environment have undercut sentiment, especially with recent data having already shown a moderation in inflation pressures and weakening economic activity. Broad selling efforts have the main indices pinned near session lows. The S&P 500, which hit 4,100 on Tuesday, is trading below the 3,900 level.

The main sticking point for stock market participants is that the Fed may overtighten and trigger a deeper economic setback in the U.S. That thinking is stoking a belief that 2023 earnings estimates are too high, so investors have been reticent to buy stocks today.

The slowdown issue, though, is a global one, as other central banks have also been raising rates — and pointing to the likelihood of more rate hikes to come — to get inflation under control.

Today, the ECB, Bank of England, Swiss National Bank, and Hong Kong Monetary Authority all raised their benchmark rates by 50 basis points. The Norges Bank raised its benchmark rate by 25 basis points.

The slowdown concerns were heightened today following a slate of economic reports. China’s November retail sales, industrial production, and fixed asset investment data was all weaker than expected. In turn, November retail sales and industrial production in the U.S., as well as the December Philadelphia Fed Index and New York Empire State Manufacturing Survey, were also weaker than expected.

All 11 S&P 500 sectors trade down with losses of at least 1.2% (energy). The top laggards are the heavily weighted information technology (-3.5%) and communication services (-3.7%) sectors.

Notably, small and mid cap stocks exhibit slimmer losses than their larger peers. The Russell 2000 and the S&P Mid Cap 400 have a slight edge over the three main indices.

Treasury yields are inching lower while the U.S. Dollar Index climbs. The 2-yr note yield is down one basis point to 4.25% and the 10-yr note yield is down six basis points to 3.44%.

November Retail Sales -0.6% (consensus -0.1%); Prior 1.3%; November Retail Sales ex-auto -0.2% (consensus 0.2%); Prior was revised to 1.2% from 1.3%