May 29, 2022

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Stocks fall to their lowest levels in 2022 as volatility dominates the markets

Stocks fall to their lowest levels in 2022 as volatility dominates the markets

US stocks fell on Monday to extend last week’s losses, as investors looked to more data this week on inflation and earnings to gauge the strength of the economy and corporate earnings as the Federal Reserve continues to tighten monetary policy.

The S&P 500 is down more than 2% on the day to set a new year-to-date low at just over 4,000. That added to losses after the index posted its fifth consecutive weekly decline last week. The Nasdaq Composite Index is down more than 2.5%, and the Dow Jones is down more than 400 points.

A combination of geopolitical, COVID-19, and inflationary concerns have weighed heavily on risky assets in recent weeks, leading to volatility in stocks, cryptocurrencies and commodities. The CBOE Volatility Index, or VIX, has jumped above 34, or well above its long-term average of around 20.

“The path of least resistance remains down for global stock markets to start the week,” wrote Brian Price, head of investment management at Commonwealth Financial Network. “The overwhelming focus remains on inflation, rising interest rates, and the war in Ukraine.” In an email on Monday. “The combination of tight supply chains from China’s no-coronavirus policy, and higher oil and food prices due to the war in Ukraine are causing inflationary fears to drive away risky assets. The market is currently devoid of major positive catalysts, so it is not Surprisingly, we start the week under pressure.”

Investors this week Waiting for more data on the state of inflation in the United States, which will help show how much more aggressive the Federal Reserve needs to be in order to rein in higher price pressures. Wednesday’s Consumer Price Index (CPI) and April’s Producer Price Index (PPI) for Thursday are expected to show a slowdown in price increases, suggesting that March could be the peak rate of price increases across the economy.

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This data will come on the heels of the Federal Reserve’s latest monetary policy decision and Fed Chair Jerome Powell’s press conference, which was met with increased volatility among risk assets. Stocks jumped and then slid, and Treasury yields rose after the monetary policy decision, as investors assessed whether the tools at the central bank’s disposal would be enough to prevent inflation from becoming more entrenched while maintaining economic growth.

“We knew the Fed was going to raise interest rates by 50 basis points — that was the most telegraphic hike in human history. But the markets sold out. Then they finally did it and it was like, well, it’s done,” Eric Deaton, head of the Alliance told Wealth and General Manager, Yahoo Finance Live on Friday. “So I got a lot of sales coverage and I got a great rally.”

He added, “This wasn’t the real deal. The real deal was what followed…and that’s that there’s a huge amount of uncertainty out there.” “Yes, we know the Fed is going to go up. How often are they going to raise? There is a huge disparity between interest rates and where the inflation rate is. Will the Fed have to get as high as 6% or 7%, or will inflation go down? Will they meet in the middle? This uncertainty is one of the big factors driving this market to continue declining.”

Other concerns about economic growth have also multiplied recently, as the Russian war in Ukraine and renewed virus-related lockdowns in China raise concerns about more ongoing disruptions to the supply chain. Many strategists agreed that the next moves in the market would be driven by the Fed’s response to inflation against this backdrop.

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“Looking ahead, the market’s trajectory will depend on the Fed’s fight against inflation,” David Kostin, chief US equity strategist at Goldman Sachs, wrote in a note. “In our base case, the negative impact on valuations from higher real rates will be partially offset by a narrowing yield gap. If recession risks rise, interest rates may fall but not enough to prevent multiple sand stocks prices from falling further.”

In the meantime, earnings season will continue this week with major names including Disney (dis), peloton (PTON) and Rivian Automotive (countryside) Report results. So far, 85% of S&P 500 components have reported actual results, according to FactSet. As of Friday, the expected earnings growth rate for the S&P 500 was 9.1%, which, if maintained, would mark the index’s slowest increase since the fourth quarter of 2020 and fall below the five-year average growth rate of 15.0 %. .

11:16 a.m. ET: One-year inflation expectations for consumers fell in April, but still well above historical averages

Consumer expectations for inflation declined slightly in April compared to March while remaining at historically high levels, according to new data from New York Federal Reserve on Monday.

The April poll suggested that consumers expect inflation for next year to rise by 6.3%. However, over a three-year time horizon, inflation expectations rose by 0.2 percentage points from March to 3.9%. The one- and three-year forecast rates were 0.3 percentage points from all-time highs.

10:52AM ET: Bitcoin drops to its lowest level since July 2021, sending crypto-related stocks lower

The selloff across risky assets extended to cryptocurrencies, with bitcoin prices dropping to their lowest level in nearly a year during Monday’s session.

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The price of the largest cryptocurrency by market capitalization has fallen below $33,000, or lower since July 2021. Ethereum is also down about 5% to trade below $2,400. Drops between some major tokens and altcoins dragged crypto-related stocks like Coinbase, which saw the stock drop 14% on the day to below $90 per share. Riot Blockchain shares are down 15.5%, and Marathon Digital Holdings shares are down 14%.

9:30 a.m. ET: Stocks opened lower, holding losses overnight

Here are the major moves in the markets as of 9:30 AM ET:

7:43AM ET Monday: Stock futures head toward a lower open

Here’s where the markets are trading on Monday morning:

  • S&P 500 futures contracts (ES = F.): -85 points (-2.06%) to 4,034.50

  • Dow futures contractsYM = F.): -555 points (-1.69%) to 32,254.00

  • Nasdaq futures contractsNQ = F.): -337 points (-2.65%) to 12,358.75 points

  • raw (CL = F.):- $2.65 (-2.41%) to $107.12 per barrel

  • He went (GC = F.): – $25.10 (-1.33%) to $1857.70 per ounce

  • Treasury for 10 years (^ degeneration): +5.3 basis points to produce 3.177%

NEW YORK, NY – May 6: Traders work on the floor of the New York Stock Exchange (NYSE) on May 6, 2022 in New York City. After a day that saw a drop of more than 1,000 points on inflation concerns, the Dow Jones Industrial Average fell more than 200 points in morning trading. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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