After Wild Trading Indexes Nearly Erase Losses

Barry Adams
12 May, 2022
New York City

Stocks were on the defensive after the market rebound effort failed in the morning but managed to erase losses of the day. 

The familiar story of the last five weeks played out again today when the leading indexes attempt to open or stay above the flat line but gradually sink to lower levels in the day. 

The S&P 500 index fell 0.13% to 3,930.08 and the Nasdaq Composite index closed nearly unchanged at 11,370.96. 

For the year, the S&P 500 has fallen 18%, the Nasdaq Composite index has declined 28.2%, and the Russell 2000 index has lost 23.4%. 

The U.S. Senate in a 80-19 vote confirmed the reappointment of Federal Reserve Chairman Jerome Powell for the second term.  

The nomination was in the works for months and the approval was widely anticipated as the Fed steps its plan to lift rates higher and faster. 

The tech selloff continued on Wall Street and leading companies led the losers again but major averages managed to erase day's losses. 

Apple declined 3.2%, Microsoft dropped 2.6%, Tesla fell 1%, Alphabet declined 1.3%, and Nvidia Corp fell 4%.  

Twitter Inc fell 2.7% to $44.76, about 10% below the takeover price offered by Elon Musk led group of investors on the worries that the deal may not go through. 

Separately, Twitter also focused on trimming expenses and froze hiring in the event the deal falls apart and said the two leading executives departed the company. 

Earlier in the session, stocks opened lower after the producer price index in April eased  but stayed near the elevated level in March. 

The producer price index in April rose 0.5% from March and jumped a whopping 11% from a year ago but cooled from 11.5% annual rate increase in March. 

Core rate of wholesale price which excludes food, energy and trade services rose 0.6% in April and jumped 6.9% from a year ago but fell from 0.9% and annual rate of 7.1% in March.  

The wholesale price index showed that the inflation is broad-based and that fed into the worries that the Federal Reserve's response in taming inflation is lagging and may be ineffective. 

The U.S. fed fund rates are still near 1%, significantly lower than the inflation rate between 8% and 9%, resulting in negative real rates of at least 7%. 

The Fed has a long way to go and seems to be in no hurry. 

The market sentiment in Europe was also gloomy on the worries that the central bank in the region is falling behind in rising and negative real rates are expanding. 

 The DAX index fell 2.3% to 13,503.21, the CAC-40 declined 2.5% to 6,111.47, and the FTSE 100 index decreased 2.1% to 7,191.35. 

Siemens declined 7% after the company said it will leave Russia. 

U.K. GDP growth declined to 0.8% after expanding at 1.3% in the previous quarter on a sequential basis, the Office of National Statistics said. 

The economic activities shrank 0.1% in March but overall the economy is larger by 1.2% from its pre-COVID February 2020 level. 

In Asian trading indexes generally closed lower after the release of the U.S. inflation data. 

The Nikkei index declined 1.8% to 25,748.22 and the Hang Seng Index dropped 2.2% to 19,380.34. 

Tech stocks led the losers in Tokyo and Hong Kong following the losses in the U.S.

SoftBank Group declined 8% and KDDI, Tokyo Electron, and Advantest fell between 2% and 4%.   

After the close of trading in Japan, Soft Bank said its tech-focused Vision Funds lost 3.5 trillion yen about $27.5 billion in the fiscal year ending in March. 

CEO Masayoshi Son said the company will take a more conservative approach in investing in future and will take a more cautionary view of investing in China. 

Stocks in Mumbai traded sharply lower following weak markets in Asia and the resurgent inflation. 

The Sensex index closed down 2.1% to 52,930.21 and the Nifty index fell 2.2% or 359.10 to 15,808.00. 

India's consumer inflation index is at a 8-year high but below 8.33% in May 2014 and the Industrial Production Index increased 1.9% in March, the report also noted. 

The Kospi index in Seoul dropped 1.6% and extended losses for the eighth day in a row. The index is now trading near an 18-month low on the weakness in tech stocks. 

Samsung Electronics, SK Hynix and Hyundai declined more than 1%. 

The Australian market index dropped to a five-month low on the weakness in tech and bank stocks. 

The ASX 200 fell 1.8% to close at 6,941.