Stock Market News for Jun 20, 2022
Wall Street closed modestly higher on Friday in a choppy session, alternating between gains and losses. Markets tried to rebound from a selling week, but investors were weary of the stubbornly high inflation and braced for an impending recession. Fed chairman Jerome Powell reaffirmed the central bank’s bid to bring down inflation to its target 2%, fueling fears of further interest rate hikes. Oil prices plunged to a two-week low. Two of the three major stock indexes ended in the green, while the Dow ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) dipped 0.1% or 38.29 points to close at 29,888.78. Seventeen components of the 30-stock index ended in the red, while 13 ended in the green.
The tech-heavy Nasdaq Composite finished at 10,798.35, adding 1.4% or 152.25 points, led by a rally in tech stocks.
The S&P 500 rose 0.2% or 8.07 points to close at 3,674.84. Five out of the 11 broad sectors of the benchmark index closed in the green. The Consumer Discretionary Select Sector SPDR (XLY), the Technology Select Sector SPDR (XLK) and the Communication Services Select Sector SPDR (XLC) rose 1.1%, 0.9% and 1.4%, respectively, while the Energy Select Sector SPDR (XLE) plunged 5.5%.
The fear-gauge CBOE Volatility Index (VIX) declined 5.5% to 31.13. A total of 18 billion shares were traded Friday, higher than the last 20-session average of 12.4 billion. Advancers outnumbered decliners on the NYSE by a 1.37-to-1 ratio. On the Nasdaq, a 1.92-to-1 ratio favored the advancing issues.
Powell’s Comments Garner Mixed Reactions
Towing the line of its three decades-high interest rate hike of 75 basis points made on Wednesday, Fed chairman Jerome Powell reiterated on Friday that the central bank remained committed to bring down inflation to its target 2%, as it is essential for the global financial system. Powell mentioned that the Fed is focused on restoring the widespread confidence in the dollar as a store of value, and ensuring price stability domestically. Although this sounded like a re-assurance from the apex bank to markets reeling under the pressure of inflation, this also promised further interest rate hikes.
Markets have been seeing choppy sessions as investors strive to find a balance in the Fed’s outlook toward tackling inflation with an extremely tight monetary policy, while staying away from a recession in the economy. Friday was no different, and traders closed out positions in a volatile day following his comments. The volume of shares changing hands was unusually high even as two of the three indices managed to stay in the green.
Oil Prices Edge Lower
Oil prices plunged 6% on Friday, $11 lower than the recent $125/barrel high. Brent crude fell 0.8% to $118.98/barrel, while WTI crude registered a 0.7% fall to close at $116.79. Supply is on the rise and U.S. production is at its highest since April 2020. This can trigger a rally in stocks in the coming week. Although prices fell on global economic concerns, the inverse relation that oil prices have with commodity prices can keep the markets in good stead.
Consequently, shares of American Express Company AXP and NVIDIA Corporation NVDA rose 4.9% and 1.8%, respectively. American Express currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Federal Reserve reported on Friday that capacity utilization for May had increased to 79%, 0.5% below its long-run (1972-2021) average. This was 0.25% below the consensus of 79.2% for the period. The percentage for April was revised down to 78.9% from the previously reported 79%.
Industrial production moved up 0.2% in May against a consensus of 0.4%. The percentage increase in April was revised up to 1.4% from the previously reported 1.1%.
Weekly Roundup
Wall Street posted its worst week since 2020, as all the three major indexes fell for the third week in a row. The Dow, the S&P 500 and the Nasdaq slid 4.8%, 5.8% and 4.8%, respectively. Dow Industrials may be on the verge of joining the S&P 500 in bear territory, having closed 11 of its last 12 weeks in the red. Investor mood has been driven by un-ending inflation and fears of recession arising out of the Fed’s monetary policies. On Wednesday, the Fed raised its benchmark interest rate by 75 basis points, its highest hike since 1994.
About E. J. McKay
E.J.McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.