U.S. Stock Market's Worst First-Half Returns In Decades May Not Be Over

Barry Adams
30 Jun, 2022
New York City

U.S. stocks closed down after another volatile day reacting to fresh batch of economic data. 

The S&P 500 index dropped 0.9% to 3,785.35 and the Nasdaq Composite index fell 1.3% to 11,028.74. 

Market sentiment was weak as focus shifted to consumer's health after spending rose at the slowest pace in a year and just a few days ago the first quarter economic decline was revised deeper on weaker-than-expected consumption. 

The personal spending rose 0.2% in May, the slowest pace in the year according to the latest data from the Bureau of Economic Analysis. 

Weekly initial claims for the week ending June 25 decreased by 2,000 to 231,000, the Labor Department reported today. 

The continuing claims for the week ending June 18 decreased by 3,000 to 1.328 million.

However, the strength in the labor market was overwhelmed by the elevated inflation data today. 

The personal consumption expenditures index, Fed's preferred measure of inflation, on an annual basis increased at 6.3% in June and matched the rate in May, the data from the Bureau of Economic Analysis showed on Thursday. 

The core index, excluding food and energy prices, declined to 4.7% in May from 4.9% in April but still at elevated levels last seen in the 1980s.  

The S&P 500 index fell over 20% and the Nasdaq Composite index declined 30% in the first-half and the indexes delivered their worst first-half results in 52 years. 

The market turmoil touched every sector of the economy except the commodities and oil and the S&P 500 index has fallen in 10 of the last 12 weeks punctuated with sharp rallies followed by deeper losses. 

The S&P 500 index fell in the first-half  in 17 of the last 53 years.

The widely followed index dropped 21% in the first-half of 1970 and rebounded 26.5% in the second-half and closed up 4.01%.  

The indexes are likely to face more pain in the second-half, unlike in the previous downturns when the Fed was ready to provide more liquidity and relief in interest rates. 

The Fed has exhausted most potent of its tools - lowering interest rates and buying government debts - and support asset prices.  

The yield on 10-year Treasury notes declined to 3.014%. 

Futures of crude oil dropped 3.6% to $105.86 a barrel and natural gas dropped 14% to $5.58 a thermal unit. 

Retail stocks led the decliners after luxury furnishing retailer RH Inc issued its second revenue warning in a month. 

RH dropped 10.5% to $212.05 after the retailer said second quarter revenues are estimated to decline between 1% and 3% and fiscal 2022 sales are estimated to fall between 2% and 5% from the previous range between zero and 2% growth issued on June 2. 

Tech stocks continued their slide in the morning trading and the tech-heavy Nasdaq is set to decline more than 20% in the second quarter. 

Apple Inc fell 1.9%, Alphabet declined 2.2%, Amazon dropped 2.3%, and Meta eased 0.4%. 

 

European Indexes Log Worst Quarterly Losses Since 2020 

Market indexes across Europe faced selling pressure after French inflation rose at the fastest pace since the euro introduction and German jobless rate rose unexpectedly. 

The euro zone unemployment rate fell to a record low 6.6% in May from 6.7% in April and 8.1% a year ago, the eurostat data showed on Thursday. 

The number of unemployed people in the currency zone fell to 11.004 million, a decline of 2.165 million from a year ago. 

Youth unemployment rate declined to 13.1% in May from 13.8% in April. 

The EU 27 jobless rate held at 6.1% in May. 

German retail sales in May increased 0.6% after adjusting for inflation and rose 2.0% in nominal terms from April, the Federal Statistical Office or destatis said on Thursday.

From a year ago, real retail sales declined 3.6% and nominal retail sales rose 4.1% in May. 

June unemployment rate adjusted for seasonal factors in Germany increased to 5.3% from 4.9% in May, Destatis data showed on Thursday. 

Jobless rate a year ago was 5.7%. 

The unemployment rate increased unexpectedly after Ukrainian refugees were counted in people searching for jobs. 

French inflation rate rose at the fastest pace since the euro was introduced in 1999. 

Consumer price inflation rose 5.8% in June after rising at 5.2% in May, according to the latest data released by Insee on Thursday. 

The inflation rate a year ago was 1.5%. 

The DAX index dropped 1.7% to 12,783.77, the CAC-40 index declined 1.8% to 5,922.86, and the FTSE 100 index fell 1.96% to 7,169.28. 

The German index dropped more than 20% and the French index over 18% in the first half of 2022.  

The FTSE index in London  closed the first-half down more than 4%.  

The indexes sank more after the release of U.S. inflation data. 

The core personal consumption expenditures price index increased to 4.7% in May, lower than 4.9% in April, the U.S. Commerce Department reported on Thursday. 

The inflation measure declined in May but still elevated near the levels last seen in the 1980s dragged market indexes in New York and in Europe. 

BioNTech SE gained 1.9% to 137.50 euros after the company along with Pfizer Inc were awarded a new vaccine order worth $3.2 billion. 

Uniper SE dropped 117.10% to 13.72 euros after the German Utility withdrew its annual outlook for the fiscal year 2022 citing natural gas restrictions from Russia-based Gazprom. 

Bunzl Plc increased 1.7% to 2,717.0 pence after the U.K.-based business supplies distributor lifted its outlook for the year.  

Saab AB jumped 3.7% to 420.90 Swedish kroner after the defense group won an order of 7.3 billion kroner from the Swedish government. 

 

Asian Markets Close Down On Weaker Rebound in China Activities

Markets in Asia traded down in cautious trading as global recession worries dominated market sentiment. 

The Nikkei 225 index declined 1.5% to 26,393.04 and the Hang Seng Index fell 0.6% to 21,859.79. 

Tech stocks led the decliners in Tokyo and in Hong Kong. 

Toyota Motor dropped 1.3% after the largest automaker missed its latest production target. 

Tokyo Electron fell 4.1% to 44,300 yen and Screen Holdings fell 5.4% to 9,170 yen.   

The official measure of factory and service activities showed an expansion in June after contracting for three months in a row. but the rate was slower than expected. 

The Kospi average dropped 1.91% to close at 2,332.64.

In Seoul trading, Hyundai Motor gained 2.9% but SK Hynix fell 3.2% and Samsung Electronics dropped 1.7%. 

India stocks in volatile trading closed down as global slowdown and elevated inflation worries dominated trading sentiment. 

Benchmark indexes in directionless trading charted a volatile pattern. 

The Sensex index fell 8.03 to 53,018.94 and the Nifty index eased 18.18 to 15,780.25. 

Weak iron ore prices and worries of higher and faster interest rates also dragged down Australian indexes. 

 The ASX 200 dropped 1.97% to 6,568.10.

Banks led the decliners and Commonwealth Bank of Australia declined 2.8% to $90.38, Westpac Banking Corp dropped 2.2% to $19.50, National Australia Bank fell  2.4% to $27.39, and ANZ declined 2.7% to $22.03.

BHP Group, Rio Tinto and Fortescue Metals gained between 3% and 5%.