The stock sell-off deepened after weak consumer spending data fueled recession worries, with the S&P 500 index suffering its worst first half of the year since Richard Nixon as president.
It’s been a history book route, with the benchmark gauge falling 21% in the first six months of the year – the highest for such a time period since 1970. Supermarkets continue to pile up on Wall Street, with gains The 10-year yield in the United States fell sharply. up about 3% from a decade high of 3.5% in mid-June. The dollar had its best quarter since 2016. The nearly 60% drop for Bitcoin since late March is the biggest since Q3 2011.
U.S. consumer spending fell for the first time this year, suggesting an economy that is somewhat weaker than previously thought amid rapid inflation and a rapid rise in the Federal Reserve. A view that central banks need to act quickly because they have misjudged inflation has roiled markets, with traders ramping up bets the economy will be in trouble. under strong tightening.
“The stagnation of inflation plaguing our country right now is going to put the stock market on edge over the medium term,” said Matt Maley, chief market strategist at Miller Tabak. “When demand is not the main reason inflation is an issue, a slower economy will not help reduce inflation as much as some experts think.”
Key segments of the world’s largest bond market – such as the spread between 5-year and 10-year yields – have inverted, signaling bets that higher interest rates will hurt the economy. Inversions typically precede recessions by six to 18 months, according to Bloomberg data.
According to Greg Marcus, managing director at UBS Private Wealth Management, after a difficult first half, July will be pivotal for the market’s future direction amid corporate earnings, key inflation data and Fed meeting, according to Greg Marcus, managing director at UBS Private Wealth Management. He said volatility is likely to remain elevated until there is evidence that inflation is moderating, recession risks are easing and geopolitical threats abate.
Over the past few months, a strategy that has worked well for a decade has hit new lows in the market. Traders have shied away from the “buy-the-dip” mantra while embracing a “sell-the-bullish” mode. As a result, the S&P 500 entered a bear market for the second time since 2020, down more than 20% from its January peak.
But the dismal performance is no sign of what’s to come. The US equity benchmark lost 21% in the first half of 1970, during a period of high inflation to which the current environment has been compared. It grew 27% in the last six months of that year.
“We’re going to have double-digit returns between now and the end of the year,” Jonathan Golub, head of US equity strategy at Credit Suisse, told Bloomberg Television. “We don’t have as much of a profit problem as people say.”
Earlier this week, strategists at Goldman Sachs Group Inc. note that estimates for US margins are overly optimistic, putting stocks at greater risk of falling as Wall Street analysts lower their expectations. Morgan Stanley’s Lisa Shalett said on Monday analysts need a reality check on their earnings forecasts for the quarter.
Elsewhere, oil suffered its first monthly drop since November as OPEC+ completed a production recall it had halted during the pandemic. Gold fell for the third month in a row.
What to watch this week:
- Eurozone CPI, Friday
- US Construction Spending, ISM Manufacturing, Friday
Some key moves in the market:
Inventory
- The S&P 500 is down 0.9% at 4 p.m. New York time
- Nasdaq 100 drops 1.3%
- The Dow Jones Industrial Average fell 0.8%
- MSCI World Index down 1%
Currency
- Bloomberg Dollar Spot Index drops 0.4%
- The euro rose 0.4% to $1.0481
- British Pound rose 0.4% to $1.2173
- Japanese yen rose 0.6% to 135.74 a dollar
Bonds
- Yields on 10-year Treasuries fell seven basis points to 3.02%
- German 10-year yield drops 18 basis points to 1.34%
- UK 10-year yield drops 16 basis points to 2.23%
Goods
- West Texas Intermediate crude fell 3.6% to $105.82 per barrel
- Gold futures fell 0.6% to $1,807.30 an ounce
–With support from Andreea Papuc, Denitsa Tsekova, Cecile Gutscher, Lu Wang, Elaine Chen, Isabelle Lee, Vildana Hajric and Enrique Roces.
