Negative Sentiment Drives S&P 500 and Nasdaq Lower

Barry Adams
09 Jun, 2022
New York City

Stocks declined after weekly jobless claims rose and the European Central Bank suggested a plan to lift rates for the first time in more than a decade. 

Futures of the S&P 500 index declined 0.2% to 4,106.25 and the Nasdaq Composite index fell 0.5% to 12,552.07. 

The European Central Bank said it plans to lift rates at its next meeting on July 1 and lower economic growth outlook. 

After the meeting of the Governing Council, the central bank said it plans to lift rates by 25 basis points at its next meeting in July and expects additional hikes at the September meeting. 

The central bank had previously guided that any rate increases will be announced only after the end of the net asset purchase program on July 1. 

The euro declined after the announcement but managed to rebound 0.5% by mid-day trading and the yield on 10-year German Bund increased to 1.41%. 

For now the main lending rate from the ECB was held at 0.00%, marginal lending rate at 0.25%, and bank deposits with the central bank earned -0.5%. 

Annual consumer price inflation jumped to a 4-decade high of 8.1% in May, and rate hikes of 15 basis points are likely to have no or minimal impact on inflationary pressures. 

The ECB revised higher its 2022 inflation estimate to 6.8% from the previous estimate of 5.1% and lowered economic growth estimate to 2.8% from the 3.7% estimate in March.

The central bank also lowered 2023 and 2024 growth estimates and said inflation pressures are likely to subside in the next two years but are expected to remain above its 2% target rate in 2023. 

The ECB last hiked rates in 2011 and the central bank has kept deposit rates in negative territory since 2014. 

Initial jobless claims in the week ending on June 4 rose more than expected and the 4-week average also climbed. 

Initial claims increased 27,000 to 229,000 from the revised 222,000 claims in the prior week. 

The 4-week average also edged up 8,000 to 215,000 from the previous week's revised average of 207,000. 

Stocks trimmed early gains and turned negative after the yield on 10-year Treasury notes increased to 3.051%. 

Futures of crude oil edged down 74 cents to $121.40 a barrel and natural gas fell 55 cents to $8.11 a unit. 

Five Below plunged 7.8% to $126.77 after the discount retailer reported weaker than expected earnings and lowered its outlook for the second quarter and full-year. 

Target Corporation jumped 0.1% $156.94 after the retailer lifted its dividend despite the recent inventory challenges and weakening profit outlook. 

Target declared a quarterly dividend of $1.08 per common share, a 20% increase from the prior quarterly dividend of 90 cents. 

The dividend is payable Sept. 10, 2022 to shareholders of record at the close of business August 17, 2022.