S&P 500 Sinks Deeper in Bear Territory, Mortgage Rates Hit 6.3%

Barry Adams
14 Jun, 2022
New York City

Global markets declined ahead of the U.S. rate decision tomorrow and cautious traders stayed on the sidelines. 

The S&P 500 closed down 0.4% to 3,735.64 and the Nasdaq Composite index rose 0.2% to 10,828.35. 

The S&P 500 index declined for the fifth day in a row. 

The yield on 10-year Treasury notes inched slightly higher to 3.493%, record high in 11 years. 

Investors are factoring 75 basis points increase in interest rate after the Fed's policy committee meeting tomorrow after consumer prices accelerated in May driven by higher energy and food prices.  

The inflation has been running above Fed's target range of 2% for 17 months in a row. 

For nearly two years, the Fed Chairman Jerome Powell and other officials have been labeling roaring inflation as "transitory" but with every passing week  the inflation has seeped deeper and broader across all activities of the economy. 

The Fed's lagging response in containing inflation has got the market on edge with negative rates, the difference between current interest rate at 1% and latest inflation at 8.6%, running at record high of 7.6%. 

Today market indexes sank deeper in bear territory on the worries that the Fed will be forced to take drastic actions risking a recession and lifting the unemployment rate higher.   

Natural gas futures plunged on the rising supply in the domestic market after the closure of a LNG terminal exporting the commodity. 

Freeport LNG said it had a fire at Quintana Island, Texas facility and the plant will not return to full-operation till late 2022. 

EQT Corporation plunged 10.10% to $40.55 after natural gas futures plunged 16% to $7.25. 

Southwestern Energy plunged 11.3% to $7.63, Range Resources dropped 8.2% to $29.53, and Comstock Resources declined 8.9% to $16.66. 

Compass Inc plunged 11.4% to $4.22 and Redfin Corp dropped 5.5% to $8.07 after the real estate brokerage firms announced layoffs. 

Compass plans to trim 10% of its workforce and Redfin plans to cut about 8%, according to regulatory filings with the SEC. 

Compass and Redfin dropped to new 52-week lows after home sales are expected to continue to decline on rising mortgage rates. 

Rates for 30-year fixed mortgages rose 10 basis points to 6.28% today from 5.55% a week ago, according to Mortgage News Daily. 

European markets traded up but near the close the indexes started wavering and closed down.

The DAX index decreased 0.5% to 13,365.90, the CAC-40 index declined 0.6% to 5,985.52, and the FTSE 100 index fell 0.05% to 7,201.04.

Market indexes across Europe opened higher but began to waver after thirty minutes of trading and reached intra-day lows by mid-day local time. 

Brent crude jumped $2.81 to $125.01 and West Texas crude advanced $2.51 to $123.43 a barrel. 

Asian markets were on the defensive on the growing worries of global economic slowdown, rising energy prices, and extended lockdowns in China. 

The Nikkei index fell 1.3% to 26,692.86, the Hang Seng Index closed nearly unchanged at 21,067.99, and the Sensex index edged lower 0.3% to 52,693.57. 

Investors were on the edge after market indexes extended losses in New York for a third day in a row. 

The Nikkei index dropped as much as 2.2% before recovering in the afternoon on the worries of inflation. 

India's wholesale inflation accelerated to 15.88% in May from 13.11% in April, according to the latest data released by the Ministry of Commerce & Industry. 

The latest bout of inflation was driven by rising prices in petroleum products, chemicals, and food and non-food items. 

The index is at a record high since the current data series began in 2011.

The Australian market index ASX 200 fell 3.55% to 6,686.58 after a day of holiday and catching up with market losses around the world on Monday.