Rate Worries Halt Four-Week-Long Rally, 10-Year Yield Nears 3%

Barry Adams
19 Aug, 2022
New York City

Stocks turned lower on Wall Street after inflation and higher rates worries resurfaced and the benchmark indexes halted four weekly gains a row. 

The Fed's minutes of the latest meeting and comments from St. Louis Federal Reserve President James Bullard seemed to indicate that the central bank will continue its campaign to lift rates at a faster pace, contradicting the hopes of a slower rate increase in the near-term. 

Tech stocks led decliners as investors avoided high growth stocks and the S&P 500 index is set to close down 1% and the tech-heavy Nasdaq 2.2% for the week. 

The S&P 500 index fell 1.3% or 55.26 to 4,228.48 and the Nasdaq Composite index dropped 2.01% to 12,705.20.  

For the week, the S&P 500 declined 1.2% and the Nasdaq Composite dropped 2.6%. 

Futures of crude oil decreased 45 cents to $90.05 a barrel and natural gas rose 9 cents to $9.29 a thermal unit. 

The yield on 10-year Treasury notes rose to 2.97% and 30-year Treasury bonds traded up 7 basis points to 3.22% and 2-year Treasury notes rose to 3.27%. 

 

Movers: Bed Bath & Beyond, Cineworld, Wayfair

Bed Bath & Beyond dropped 40.2% to $11.14 after investor Ryan Cohen sold his entire stake of 9.4 million shares and call options.  

Cohen's filings with the regulatory agency SEC shows that the stake in the homewares retailer was sold on Tuesday and Wednesday. 

According to the regulatory filings in March, Cohen, co-founder of Chewy.com and a board member of AMC, spent nearly $120 million in acquiring a stake in the retailer and sold his positions after five months in the low 20's, resulting in a profit of at least $60 million. 

Bill.com Holdings Inc rose 13% to $168.80 after the back-office software provider reported better-than-expected quarterly results. 

Revenues in the quarter ending in June soared 156% to $200.2 million. 

Net loss in the quarter surged to $84.9 million or $0.81 a share, basic and diluted, compared to net loss of $41.9 million or $0.48 per share,

The company forecasted fiscal 2023 first quarter revenues to fall between $208 million and $211 million, an increase between 76% and 78% from a year ago. 

Bill.com forecasted fiscal 2023 revenues in the range between $955.5 million and $973.5 million, representing an increase between 49% and 52%.  

Deere & Company declined 1.6% to $362.93 after the maker of industrial equipment reported higher sales but earnings were below expectations. 

Net revenues in the third quarter ending in July increased 22% to $14.1 billion

Net income in the fiscal third quarter increased to $1.88 billion or $6.16 a share compared to $1.67 billion or $5.32 a share.

The higher production costs nearly wiped out the price increase implemented by the company, but improved volume mixed lifted the earnings in the quarter. 

Deere also tightened its annual sales range between $7.0 billion and $7.2 billion from the previous range between $7.0 billion and $7.4 billion. 

Foot Locker, Inc soared 19.8% to $38.28 after the athletic footwear and apparel retailer posted better-than-expected results and announced the appointment of a new chief executive officer. 

Richard Johnson will be replaced by Mary Dillon, former chief executive of Ulta Beauty   on September 1. 

Madison Square Garden Entertainment Group rose 2.0% to $63.92 on the news that the company's board is looking to separate its live entertainment business and MSG Networks businesses.  

Ross Stores fell 2.1% to $90.01 after the discount retailer reported strong quarterly results but forecasted weaker annual outlook. 

The retailer said its quarterly results were impacted by increased promotional activities and higher product costs. 

Cineworld, the parent of Regal Cinemas, plunged as much as 90% before closing down 60% after the company searches for capital injection and prepares for a bankruptcy filing. 

The parent of Regal Cinemas, operates more than 540 locations in the U.S. and more than 750 worldwide, a day ago announced that existing shareholders may be diluted significantly in the event of new capital injection. 

Following the announcement, the company is looking for bankruptcy advisors in the U.S. and the U.K. 

Wayfair Inc dropped 19.3% to $57.73 after the online furniture retailer said in a regulatory filing that it plans to cut 5% of its staff or 870 positions as a part to cut costs. 

The company plans to take a one-time charge in the third quarter between $30 million and $40 million linked to the employee severance and benefits expenses. 

 

European Markets Fall On Inflation Worries 

European markets closed down amid worries of economic slowdown, soaring inflation, and the prospects of interest rate hikes in coming months.  

European markets have gained at least 7% since mid-June on the hopes that the inflation is peaking and future rate hikes are less likely. 

However, the U.S. Federal Reserve's latest minutes of meeting poured cold water on market optimism. 

The DAX index declined 1.1% to 13,544.52, the CAC -40 index fell 0.9% to 6,495.93, and the FTSE 100 index added 0.1% to 7,550.37. 

The dollar rebounded in the euro dropped to 1$1.004 and the U.K. pound declined to $1.18 after the release of the retail sales data. 

Retail sales in July unexpectedly increased 0.3% on a monthly basis after rising at 0.2% in June, the Office for National Statistics reported Friday. 

On a yearly basis, retail sales declined 3.4% in July and sales are likely to fall as inflation surges above 10%. 

Germany's producer price index, a measure of wholesale prices, soared to 37.2% in July after rising 32.7% in June, the Destatis reported Friday. 

The latest surge in wholesale prices was driven by a 105% jump in energy prices from a year ago. 

In Paris trading, ArcelorMittal and Air France-KLM led the decliners with a loss of 5%. 

Societe Generale, BNP Paribas, Credit Agricole, Accor, Renault, and Airbus Group fell between 3% and 3.5%. 

In Frankfurt trading, Deutsche Bank, Deutsche Lufthansa, Daimler, Porsche Automobil, BMW, Infineon, and Vonovia declined between 3% and 5%. 

FLSmidth & Co soared 9.8% to 221.0 Danish kroner after the Danish mining equipment maker lifted its annual outlook. 

The Swiss benchmark SMI closed down 10.87 points or 0.1% to 11,156.72 after dropping as low as 11,125.80 and trading as high as 11,241.18.

Swiss industrial production rose 5.1% in the second quarter, the Federal Statistics Office reported Friday. 

Credit Suisse and UBS Group declined nearly 4% and Dufry, Flughafen Zurich, and VAT Group fell between 2% and 4%.