The stock market fell yesterday following the three-day holiday weekend. Fears increased about the future of interest rates and the state of the economy. The S&P Global Purchasing Manager’s index showed further contraction, coming in at 47.8, while January existing home sales fell 0.7% month over month to 4.00 million. The equity futures are trading slightly in the green this morning, following a Tuesday’s down trading session.
Overall, the stock market indices fell throughout the day, ending near their lows. Overall, the S&P 500 declined 82 points (down 2.00%), the NASDAQ was off 295 points (down 2.50%), and the Dow Jones Industrial Average fell 697 points (down 2.06%). Moreover, market breadth was heavily negative, as decliners outpaced advancers by a 7.1-to-1.0 ratio. Consumer discretionary stocks were among the worst performers, weighed down by lackluster performance from several large retailers. On the other hand, consumer staples were among the best performers, though only on a relative basis.
A few large companies recorded lackluster earnings reports and guidance, including home-improvement retail giant Home Depot (HD). Dow-30 component Intel (INTC) delayed a large chip order from Taiwan Semiconductor (TSM), suggesting weaker sales. Intel also announced that it would be cutting its quarterly dividend by 65% to $0.125. On the other hand, several companies posted solid quarterly reports after the close yesterday and before the open today, including Palo Alto Networks (PANW).
In commodity news, oil prices fell yesterday as traders feared an oversupply of the fuel source. Elsewhere, U.S. Treasury bonds yields were mixed, with short-term rates rising and long-term ones falling. Additionally, traders are starting to price in increasing odds of a larger interest rate hike at the March Federal Reserve meeting. The Chicago Board Options Exchange Volatility Index, or VIX, rose as traders demanded more options protection.
The economic slate is quite empty until later today when the Federal Reserve will release the minutes from the late January meeting of its Federal Open Market Committee (FOMC). This should give some insight into how officials of the Fed are thinking, though it should be noted that several Regional Fed Presidents have been more hawkish in their recent commentary. This includes St. Louis Fed President James Bullard stating that a more-aggressive interest rate hike would give the Fed a better chance to beat inflation. Even so, the market has shrugged off some of this sentiment early today, though it could change when the Fed minutes are released this afternoon.
Several economic reports are slated for release in the coming days. These include initial jobless claims and the U.S. Bureau of Economic Analysis report on the fourth-quarter 2022 GDP on Thursday. Core and Non-Core Consumer Personal Expenditures Indices will come out on Friday. Additionally, several regional Federal Reserve Presidents will give remarks about the economy in the days ahead, giving further insight into the Fed’s collective thinking. Elsewhere, several hundred companies will release fourth-quarter 2022 earnings reports and guidance for 2023 in the days ahead. We think most eyes will be on any inflationary data and earnings guidance for future quarters.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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