Stocks extended their selloff on Monday, as investors continued to grapple with a slew of negative market factors. As a result, the major U.S. indexes all hit new lows for 2022.
There were no new developments to fuel the downturn, as traders already had enough on their plates to worry about. This includes the highest rate of inflation in more than 40 years, which is eating into corporate and consumer pocketbooks. Meanwhile, the Federal Reserve recently raised its overnight lending rate by the highest amount in 20 years, and is set to continue tightening the monetary strings in the months ahead. As a result, the threat of stagflation (a period marked by a combination of high inflation and a stagnating economy) continues to grow. On top of all this, the war in Ukraine has exacerbated the global inflationary and supply-chain woes, as the European Union pushes for an embargo on Russian oil. Meanwhile, continued Covid-19 lockdowns in China are putting yet a further burden on the availability of goods and commodities.
Altogether, the Dow Jones Industrial Average, closed down 653 points yesterday, or just under 2%. The biggest losers in the blue chip index were Boeing (BA), down 10.5%, and Chevron (CVX) down 6.7%. The S&P 500 lost 132 points (-3.2%), hitting its lowest level in over a year. Meanwhile, the tech-laden NASDAQ suffered a loss of 521 points, or 4.3%. Nearly all of the major market sectors closed deeply in the red, with the largest losses coming from energy (-8.3%), consumer discretionary (-4.6%) and technology (-3.9%) issues. Consumer staples was the lone group to gain any ground, ending just above the breakeven mark. The price of West Texas Intermediate oil also fell sharply, losing 6. 1%, to around $103.10 a barrel.
U.S. stock futures rebounded starting in the early morning hours, and are now suggesting a solid advance at today’s opening bell. Elsewhere, Asian markets were mostly lower overnight, but stocks in Europe are firmly in positive territory. Meanwhile, oil futures are down about 0.7%, to around $102.40 a barrel.
On the economic front this week, the Bureau of Labor Statistics’ latest report on the consumer price index will provide an important data point on Wednesday morning. In March, inflation jumped 8.5% year over year, the greatest annual rate since late 1981. Expectations are calling for a half percent decline in April, to about 8.1%. Anything higher would likely stoke fears that the Fed’s efforts are not gaining traction, and the lead bank will have to pick up the pace. (In most cases, rising interest rates will tend to push down stock prices, as fixed income investments become more attractive.) Notably, the yield on 10-year Treasury notes was at 3.08% on Monday, having moved about 1.6 percentage points higher so far this year.
– Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
