Stock Indices Finish the Day Mixed to End a Volatile Week of Trading
Last Updated 4:15PM EST
Stock indices finished Friday’s trading session mixed. The S&P 500 and the Nasdaq 100 gained 0.22% and 1.24%, respectively. Meanwhile, the Dow Jones Industrial Average fell 0.13%
All sectors finished the week lower, as the Federal Reserve was forced to raise rates higher than originally anticipated due to a high inflation report from last week. The consumer discretionary sector was the best performer, even though it fell 4.28% week-to-date.
On the other hand, the energy sector saw heavy very selling, as it lost 17.15% of its value in just five days. It would appear that investors have finally decided to take profits on the only sector that is positive on the year.
Treasury yields saw a slight increase today, with the U.S. 10-Year Treasury yield at 3.229%, an increase of 3 basis points. In addition, the Two-Year Treasury yield is at 3.164%, bringing the spread between them to only 6.5 basis points.
This spread is an important indicator closely followed by investors. Many people view a negative spread between the 10-year and the two-year yields as a warning sign of a pending recession.
Stocks Trade Higher as Oil Falls; Many High Earners Live Paycheck-to-Paycheck
Last Updated 3:15PM EST
Equities are mixed entering the final stretch of Friday’s trading session. As of 3:00 p.m. EST, the S&P 500 and the Nasdaq 100 are up 0.2% and 1.1%, respectively. Meanwhile, the Dow Jones Industrial Average is down 0.1%
Most sectors are positive, with the communications sector (XLC) being the top performer, sporting a 1.3% gain. The energy sector continues to be the biggest laggard, as it is down over 5%.
Furthermore, prices of WTI crude oil continue to slide, as prices are now hovering around $110 per barrel, significantly lower than just a few days ago when prices were above $120.
On Friday, Willis Towers Watson released a survey suggesting that 36% of those who earn over $100,000 a year are living paycheck-to-paycheck. What’s interesting is the fact that only 34% of those who earn $50,000 to $100,000 report living paycheck-to-paycheck. On the other hand, 52% of those earning less than $50,000 claimed to be struggling.
The biggest challenge for high earners was housing costs, while debt was a bigger issue for lower-income earners.
This demonstrates that cracks are starting to form in the narrative that suggests the economy is still strong. It wouldn’t take much for these individuals to fall into financial trouble should unexpected expenses pop up.
In addition, job losses are likely going to trend higher going forward as the Federal Reserve continues tightening financial conditions in an attempt to curb inflation. That means that at least one in three of those who’ll lose their jobs could find themselves in an unfavorable situation.
Most Top-Level Executives Believe a Recession is Likely
Last Updated 12:00PM EST
Stock indices are mixed halfway into Friday’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average and the S&P 500 are down 0.4% and 0.2%, respectively. Meanwhile, the Nasdaq 100 is in the green, as it is up 0.6%
The energy sector is significantly underperforming today, falling to around $73.75 per share after hitting a high of $93.31 last week. It is currently down over 5%. WTI crude oil is also negative on the day and currently trading around $111 per barrel, a decline of almost 5%.
Conversely, the real estate sector is today’s leader so far, as it is up 0.6%. Not far behind is the consumer discretionary sector, with a gain of 0.5%
On Friday, the Conference Board released its survey of 750 CEOs and other C-suite executives. According to the survey, over 60% of CEOs believe that a recession will hit prior to the end of 2023. In addition, 15% of CEOs believe that their primary region of operation is already in a recession.
Inflation, cyber attacks, and economic blocs are among the risks that survey participants see in the economy right now. In particular, the tensions between the U.S. and China are believed to have a material impact on operations in the next 12 months.
Stocks are in the Green Following Thursday’s Sell-Off
Last Updated 10:15AM EST
Equities are in the green following Thursday’s sell-off. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.01%, 0.3%, and 0.8%, respectively.
However, they are off their highs and trending lower. Thus, it wouldn’t be surprising if these gains were to disappear at some point in the day, as investor sentiment remains negative.
The energy sector (XLE) continues to see weakness this week, falling to around $76 per share after hitting a high of $93.31 last week. It is currently down over 2%. WTI crude oil is also negative on the day and is trading around $113 per barrel, a decline of over 3%.
Conversely, the real estate sector (XLRE) is today’s leader so far, as it is up 1.1%. Not far behind is the consumer discretionary sector (XLY), with a gain of 0.7%
In addition, Treasuries are pulling back from their two-day rally, as the U.S. 10-Year Treasury yield increased by six basis points to 3.26%. Alternatively, the Two-Year U.S. Treasury yield is flat relative to yesterday’s close. As a result, the spread between the 10-Year and the Two-Year has widened to 16 basis points.
Pre-Market Update
Stock futures were slightly up early on Friday morning as investors digested a slew of major updates and sharp sell-offs this week.
Futures on the Dow Jones Industrial Average (DJIA) dropped 0.76%, while those on the S&P 500 (SPX) dipped 0.89%, as of 4.26 a.m. EST, Friday. Meanwhile, the Nasdaq 100 (NDX) futures shed 1.01%.
Earlier this week, the Federal Reserve hiked the interest rate by 75 basis points, prompted by the hotter inflation reported for May. Moreover, the wholesale price index was also reported to be higher in May than in April. Also, May’s retail sales fell short of market expectations, and home construction across the U.S. declined significantly.
To connect the dots, rising inflation and interest rate hikes mean that not only are prices of goods and services on the rise, but the cost of taking out a loan to build a house, buy a car, start a business, or pay for any personal expenses is also on an uphill trek.
A weaker economic outlook by the Fed was also a drag. The Fed now expects the U.S. GDP to grow 1.7% in 2022, down from the expectation of 2.8% growth.
On Wednesday, Fed Chairman Jerome Powell mentioned that the central bank is trying its best to prevent a recession and make a ‘soft landing’ in which monetary policy does not break the continuity of economic and labor market growth.
Nonetheless, many experts are speculating that the economy has already slipped into the early stages of a recession, based on the loose definition of a recession that involves two consecutive quarters of decelerating growth.
The earnings scene was also discouraging on Thursday. Software company Adobe’s (ADBE) better-than-expected second-quarter results couldn’t save its shares from falling more than 4% in after-hours trading Thursday, based on dismal full-year guidance.
At the end of the regular trading hours Thursday, the S&P 500 was down a brutal 3.25%, pushing it deeper into the bear market, while the Dow suffered a 2.42% loss, pushing it closer to the red line marking the bear territory. The Nasdaq 100 took the largest hit on Thursday, slipping 4.02%.
Read full Disclosure
