Late Rally In S&P 500 Trims Weekly Loss, Bond Yields Fall

Barry Adams
01 Jul, 2022
New York City

U.S. stocks kicked off the second-half on a positive note with global slowdown worries looming in the backdrop after positing the worst first-half decline in more than five decades. 

The worries of global recession compounded by accelerating inflation in Europe and Asia and falling growth in new orders kept investors' appetite for riskier assets in check. 

The S&P 500 declined 16% in the second quarter ending on Thursday and fell 20.6% in the first-half. The second quarter decline was the worst since the first quarter 2020.

The Nasdaq dropped 22.4% in the second quarter and its worst record since 2008 and plunged 29.4% in the first-half. 

The stock market's decline in the quarter and the first-half touched every sector except commodities and energy.  

In Friday's trading, the S&P 500 index increased 1.1% to 3,825.31 and the Nasdaq Composite index gained 0.9% to 11,127.83. 

Despite the market gains today, the two benchmark indexes closed down for the fourth week in five. 

For the week, the S&P 500 fell 6.7% and the Nasdaq Composite declined 4.1%. 

The popular averages traded near the flat line but picked up momentum in the late afternoon to close higher ahead of a 3-day weekend. 

Futures of crude oil increased 2.8% to $108.49 and natural gas rose 4.8% to $5.68 a unit. 

The yield on 10-year Treasury notes fell to 2.9% and mortgage rates declined for the third day in a row to 5.5%. 

The latest economic news from the U.S., Europe, Japan, and China pointed to a global slowdown. 

The Institute of Supply Management said the U.S. manufacturing activity index declined to 53, the lowest since June 2020. 

The new order index dropped to 49.2 from 55.1 in May, showing a contraction for the first time since May 2020. 

The 50-mark separates expansion from contraction. 

General Motors gained 0.9% to $32.04 after the automaker said the company sold 582,401 vehicles in the second quarter, 15% fewer than a year ago. 

The company said supply chain disruptions have held up 95,000 vehicles lacking computer chips and certain components but vehicles are expected to be sold to dealers by the end of the year.  

The automaker guided net income in the June quarter to be in the range of between $1.6 billion and $1.9 billion and adjusted earnings to be in the range of between $2.3 billion and $2.6 billion. 

Micro Technology declined 2.7% to $53.78 after the chipmaker said revenues in the fiscal 2022 third quarter ending on June 2  rose to $8.6 billion from $7.6 billion a year ago. 

Net income in the quarter rose to $2.6 billion or $2.34 a share from $2.3 billion or $2.0 a share a year ago.

The chipmaker's fourth quarter guidance was substantially weaker than anticipated by analysts. 

The company expects fourth quarter revenues of $7.2 billion with a band of $400 million and diluted earnings per share of $1.52 with a 20 cents band. 

Kohl's Corporation plunged 17.3% to $29.57 after the department store retailer terminated talks to sell its business and cited deteriorating retail environment in the last six months. 

The retailer also said second quarter sales are likely to fall in high-single digits compared to the previous estimate of a decline in low-single digits and said "the company is seeing a softening in consumer spending."

The home builders advanced after 30-year fixed mortgage rates declined for the third day in a row to 5.50% after peaking at 5.9% on Jun 28, according to data available on Mortgage Daily News. 

Pulte Group gained 6.8% to $42.34, Lennar Corp advanced 5.1% to $74.14, and D R Horton added 5.3% to $69.71. 

 

Inflation In Europe Accelerates 

 

The inflation in the euro zone accelerated to 8.6% in June from 8.1% in May according to the preliminary estimate released by the eurostat Friday. 

Italian consumer prices rose at 8.0% in June after rising at 6.8% in May, a  separate report from the Italian statistics office Istat showed Friday. 

The U.K.'s Purchasing Managers' Index fell to a 22-month low of 52.1 in June from 54.6 in May, final data from S&P Global showed Friday.

The preliminary estimate was 52.0, any data above 50 indicates expansion. 

The U.K. manufacturing activities rose at the weakest pace in nearly two years on weaker new orders and production and the overall index declined for the fifth month in a row.  

The Chartered Institute of Procurement & Supply 's final Purchasing Managers' Index dropped to a two-year low of 52.8 in June from 54.6 in May.

 

Asian Markets Fall on Slowdown Worries 

 

Stocks in Asia closed down after manufacturing activities stalled in the region and India imposed windfall tax on oil companies. 

The Nikkei 225 index declined 1.7% to 25,935.92, Shanghai Composite index fell 0.32% to 3,387.64,and the Kospi average  decreased 1.17% to 2,305.42.

 The Sensex index eased 0.2% to 52,907.93 and markets in Hong Kong were closed for a holiday.   

Mitsubishi Corp and Mitusi Corp fell more than 5% after Russia set up a corporation to take over the stake held by trading companies and Shell Plc in Sakhalin Energy Investment Company.  

The two trading companies and Shell own just below 50% stake in the natural gas development firm. 

The seizure of the stake follows the recent Western sanctions on Russian businesses, trade, and persons.  

The Nikkei fell near a two-week low after the Bank of Japan's tankan survey of large companies showed business sentiment worsened in the June quarter.

Japan's jobless rate increased unexpectedly to 2.6% in May from 2.5% in April, the Ministry of Internal Affairs said Friday. 

The unemployment rate increased for the first time in four months.

A private survey in China showed manufacturing activities expanded for the first time in four months in June. 

The Caixin/Markit manufacturing Purchasing Managers' Index for June rose to 51.7 from 48.1 in May, according to an independent survey released Friday. 

India imposed windfall tax on oil companies to sustain domestic fuel supply and raise about 67,000 crore rupees or about $9 billion. 

Stocks on Dalal Street traded lower after the central government imposed windfall tax on oil companies. 

Central government imposed a one-time export tax of 6 rupees a liter on petrol and jet fuel and 13 rupees a liter on diesel, announced the finance ministry Friday.

The Sensex declined 111.01 or 0.2% to 52,907.93 and the Nifty 50 index decreased 28.20 or 0.2% to 15,752.05.

South Korea's exports in June rose 5.4% to a record high $57.73 billion on solid demand for chips and petroleum products. 

The export increased for the 20th month in a row but slowed to a single-digit after expanding double-digits for 15 months in a row. 

June imports rose 19.4% to $60.2 billion resulting in a trade deficit of $2.47 billion. 

Exports in the first half increased 15.6% to a record half-year high of $350.3 billion and imports advanced 26.2% to $360.6 billion on high energy and raw materials prices.