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Thursday, October 6, 2022

Nasdaq, S&P, Dow fall further as Powell’s hawkish remarks linger

franckreporter

The major market averages are trading in risk-off fashion Monday as investors still digest the hawkish remarks made on Friday by Federal Reserve Chairman Jerome Powell at the Jackson Hole Economic Symposium.

The Nasdaq Composite (COMP.IND) is -0.8%, the S&P 500 (SP500) is -0.4%, and the Dow (DJI) is –0.3%. Trading has been choppy so far.

Seven of 11 S&P sectors are lower, with Info Tech at the bottom. Energy is the top gainer.

Volatility levels have jumped on Wall Street with the S&P VIX Index (VIX) rising as high as 27.67, which is above both its 100- and 200-day moving averages. The VIX now sits at a level not seen since mid-July.

Treasury yields also have pushed higher. The U.S. 10-year Treasury yield (US10Y) is up 8 basis points to 3.11%, while the U.S. 2-year Treasury yield (US2Y) has gained 2 basis points to 3.41%.

On an economic front, Monday doesn’t have much to report, however investors are already eyeing Friday’s employment figures.

Morgan Stanley highlighted in an investor note: “Chair Powell and the Fed make it crystal clear that their job fighting inflation remains unfinished. Ironically, while bonds took the message in stride, stocks seemed to be shocked by the messaging. The path for stocks from here will be determined by earnings, where we still see material downside.”

“The 2H outcome will ultimately be determined by earnings expectations for next year, in our view. As a result, equity investors should be laser focused on this risk, not the Fed, particularly as we enter the seasonally weakest time of the year for earnings revisions, and inflation further eats into margins and demand.”

Among active stocks, U.S. airline companies slide into the red as airline booking demand shows weak figures. Energy names dominate the S&P gainers list while Catalent is the weakest following disappointing guidance.

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