4.10pm: S&P 500 closes at two-year low, Nasdaq a bright spot
US markets endured another tough session as comments from Federal Reserve policymakers showed the appetite for more interest rate increases had not dimmed, while the rising dollar also raised concerns over corporate earnings.
By the close the Dow Jones Industrial Average was down 124 points, or 0.42%, to 29,137, the S&P 500 dipped 7.7 points, or 0.21%, to 3,647 although the Nasdaq Composite bucked the trend rising 27 points, or 0.25%, to 10,830.
On Tuesday, St. Louis Fed President James Bullard made a case for more rate hikes, while Chicago Fed President Charles Evans said the central bank will need to raise rates by at least another percentage point this year.
The S&P 500 recorded its lowest close in two years and is now down about 24% from its record high close on January 3rd.
12.05pm: Dow swings between gains and losses
The two of major US indices have bounced back from five days of losses after the Dow Jones and S&P 500 hit their lowest closing point in two years.
At midday, the S&P 500 was flat at 3,653, while the Nasdaq Composite was up by 0.3% at 10,837. The Dow Jones hit a high of 29,659 points, before settling back to 29,216 points at the noon bell.
Keith Buchanan, senior portfolio manager at Globalt Investments, said analysts are debating whether the market is starting to form a bottom.
“Participants from my vantage point are starting to kind of pick around the carnage, if you will, from the past couple weeks and try to identify that point in time when the markets have flushed out or are at max pessimism to get more involved,” Buchanan wrote in a report.
The major movers included Norwegian, Royal Caribbean and Carnival cruise lines, up by 4.8%, 4.5% and 3.9% respectively, on news that Canada will drop COVID-19 travel restrictions in October.
American fertilizer manufacturer CF Holdings was up 6.4%, while solar company Enphase Energy rose 4.6% and chip maker Nvidia was up by 2.2%.
On the downside, Keurig Dr Pepper fell by 2.1% after Goldman Sachs (NYSE:GS) downgraded the stock to 'Neutral' from a 'Buy' rating, and Estee Lauder dropped by almost 3%, despite yesterday’s announcement of a partnership with BALMAIN focusing on luxury beauty products.
9.35am: Market mood improves…for now
US stocks reversed sharply at the open on Tuesday as bargain hunters swooped in after days of selloffs, with the S&P 500 sliding to a new closing low for 2022 and the Dow Jones Industrial Average joining the S&P 500 and Nasdaq Composite in officially entering a bear market yesterday.
Shortly after the market opened, the Dow Jones Industrial Average had gained 207 points or 0.7% at 29,468 points, the S&P 500 was up 40 points or 1.1% at 3,695 points, and the Nasdaq Composite had added 173 points or 1.6% at 10,975 points.
Meme stock AMC Entertainment Holdings (NYSE:AMC) Inc jumped 6% on the back of news that has closed a distribution agreement to sell up to 425 million shares of AMC Preferred Units, known as “APEs.” APE also soared 10%.
After rising about 3% in pre-market trading, shares of Twitter Inc (NYSE:TWTR) were steady at the open as the legal battle between the social media company and eccentric billionaire Elon Musk heats up with lawyers for both parties set to debate several unresolved pretrial information requests.
Forex.com market analyst Fiona Cincotta noted that while stocks were edging higher, this was more a pause in the market selloff rather than the start of anything more positive.
“The fundamentals remain the same, and a recession is looking increasingly more likely,” she said. “When the likes of Goldman Sachs (NYSE:GS) downgrade global shares to underweight for over three months, we can expect the final quarter of the year to be a shocker."
6.30am: Some respite?
US stocks are expected to open higher after five successive days of steep falls amid growing concerns about a faltering global economy driven by high inflation, rising interest rates and currency market gyrations.
Futures for the Dow Jones Industrial Average were up 0.5% in pre-market trading, while those for the S&P 500 added 0.7%, and contracts for the Nasdaq-100 were 0.9% higher.
The gains on stock futures come after the Dow entered the so-called bear market, roughly defined as levels around 20% lower than recent highs, and the S&P 500 index crashed to its lowest levels in about two years.
Last week’s trigger for the market rout was the Federal Reserve’s third 75-basis-point interest rate hike and expectations of more hikes in the future but turmoil in the currency market, with the pound seen heading for parity to the dollar, has added to equity market woes.
“We had a bearish start to the week on Monday and the price action across several asset classes remains volatile and chaotic - and that’s especially true for the forex markets shaken by the freefall in sterling,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The pound has been under tremendous selling pressure since the UK’s ‘mini budget’ announcement last week which fueled debt worries rather than spur growth expectations as had been hoped. The UK central bank’s decision not to deliver an emergency rate hike has prompted more selling, pushing the pound to fresh historic lows just above the US$1.03 level.
Ozkardeskaya noted that investors are sitting on cash after selling assets, citing reports that $4.6 trillion is now sitting in US money-market mutual funds paying 2% or more.
“But of course, the rising sovereign yields are also becoming attractive. The US 2-year paper now yields around 4.30%, whereas the S&P500’s dividend yield is just around 1.7%,” she added.
It remains to be seen where the flows will go but stock futures contracts this morning suggest that recent price falls may bring in bargain hunters.
On the data front, US durable goods orders and home sales prices are due out today and personal consumption expenditures numbers are due on Friday. Each of these figures will shed light on how the world’s biggest economy is faring amid prevailing concerns.
Contact the author at jon.hopkins@proactiveinvestors.com