Stock Market News for Sep 28, 2022

U.S. stock markets closed mixed on Tuesday following mixed economic data. However, market participants remained extremely cautious regarding the Fed’s rigorous interest rate hike decision. The threat of a near-term recession has unnerved investors. The Dow and the S&P 500 continued their free fall while the Nasdaq Composite ended in green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.4% or 125.82 points to close at 29,134.99. The blue-chip index posted its lowest closing since Nov 12, 2020  and has entered the bear market territory for the first time since Mar 11, 2020. Notably, 19 components of the 30-stock index ended in negative territory while 9 in green and two remained unchanged.

The tech-heavy Nasdaq Composite finished at 10,829.50, rising 0.3%  due to strong performance of large-cap technology stocks. However, the tech-laden index is currently at 33% below its all-time high. Tech tycoons like Apple Inc. AAPL and Cadence Design Systems Inc. CDNS rose 0.7% and 0.5%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 dropped 0.2% to end at 3,647.29. The broad-market index recorded its lowest closing since Dec 14, 2020. Seven out of 11 broad sectors of the benchmark index closed in negative zone and four in the green.

The Real Estate Select Sector SPDR (XLRE), the Utilities Select Sector SPDR (XLU) and the Consumer Staples Select Sector SPDR (XLP) tumbled 1.3%, 1.7% and 1.7%, respectively. On the other hand, the Energy Select Sector SPDR (XLE) gained 1.1%.

The fear-gauge CBOE Volatility Index (VIX) was up 1.1% to 32.60, marking its highest close since Jun 16. A total of 11.9 billion shares were traded on Tuesday, higher than the last 20-session average of 11.2 billion. Decliners outnumbered advancers on the NYSE by a 4.21-to-1 ratio. On Nasdaq, a 1.09 -to-1 ratio favored advancing issues.

Threat of a Recession

Economists and financial researchers are concerned that a rising dollar will hurt the sales of U.S. multinational companies as their products will be more expensive in the international markets. Further, the volume of international trade is likely to be impacted as most of these trades are settled in U.S. dollar terms.

The yields of U.S. government bonds have soared. On Sep 26, the yield on the benchmark 10-Year U.S. Treasury Note touched 4%, its highest since 2010. The yield on the short-term 2-year U.S. Treasury Note climbed 4.3%, its highest since 2007. The yield on the long-term 30-Year U.S. Treasury Note closed at 3.87%.

The yields of 2-year and 10-Year Notes have inverted for the last two months. After the last round rate hike in September, the yields on 10-Year and 30-Year Notes have also inverted. Economists generally consider this situation as a sign of an imminent recession.

Economic Data

New home sales in August increased to a seasonally adjusted 685,000 units compared with the consensus estimate of 506,000 units. July’s data was revised upward to 532,000 units from 511,000 units reported earlier.

The Conference Board reported that Consumer Confidence Index rose to 108% in September, reflecting the best reading since April. The consensus estimate was 104.5%. July’s data was revised upward to 103.6% from 103.2% reported earlier.

The Present Situation Sub- Index—based on consumers’ assessment of current business and labor market conditions—rose to 149.6% from 145.3% in August. The Expectations Sub- Index—based on consumers’ short-term outlook for income, business, and labor market conditions—increased to 80.3 from 75.8% last month.

Durable goods orders dropped 0.2% in August compared with the consensus estimate of a decline of 0.5%. The data for July was revised downward from unchanged to a drop of 0.1%. Surprisingly, a key metric of business spending climbed 1.3% in August.

The S&P CoreLogic Case-Shiller Index has shown that nationally, home prices in July rose 15.8% year over year compared with 18.1% in June. This marked the fastest pace of decline in home prices in the index’s history.

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