In Broad Selloff S&P 500 Falls 2%, Yield on 10-Year Treasury Crosses 3%

Barry Adams
22 Aug, 2022
New York City

Stocks on Wall Street fell after rate-hike worries returned and the recent market rally faltered. 

Tech stocks led losers in a broad market selloff which dragged down popular indexes down 2%. 

Popular benchmark indexes trimmed this year's losses in half after a four-week rally and the indexes are still 12% higher than the lows seen in March. 

The market rally waned in the last week and the indexes extended losses as the economy continued to slowdown and the Fed's advertised commitment to bring down inflation resurfaced ahead of the central bankers meeting. 

Investors shifted focus to the future rate path and looked ahead to comments from the Fed Chairman Jerome Powell at the central bank's three-day annual symposium scheduled to begin this Thursday August 25.  

Bond yields rose on the expectations of hawkish comments from the Fed policymakers at the annual gathering of central bankers. 

Investors are also awaiting earnings from at least 150 companies this week including Zoom Video, Palo Alto Networks, Dick's Sporting Goods, Intuit and Medtronic.  

The S&P 500 index declined 90.49 or 2.2% to 41.37.99 and the Nasdaq Composite index dropped 2.6% or 323.63 to 12,381.64. 

Futures of crude oil declined as much as $3.12 but closed down 10 cents to $90.65 a barrel and natural gas rose 43 cents to $9.77 a thermal unit. 

The yield on 10-year Treasury notes increased to 3.02% and on 2-year Treasury notes rose to 3.328%. 

AMC Entertainment Holdings Inc dropped 41.7% to $10.50 after its competitor Cineworld, the parent of Regal Cinemas, said it is facing liquidity issues and looking for new investors which may lead to substantial dilution for existing shareholders. 

AMC Preferred Equity Units were declared as a special dividend to Class A common shareholders in August and the APE began trading today and opened at $6.95 and traded as high as $10.15. 

Bed Bath & Beyond dropped 13.5% to $9.51 following a 40% plunge in Friday's trading after investor Ryan Cohen sold his entire stake in the homeware retailer. 

McDonald's Corp decreased 1.2% to $263.28 after the fast food chain added three new board members and retired one long time member in a board shakeup. 

With the changes, McDonald's board is expanded to 14 members. 

Occidental Petroleum dropped 3.1% to $69.12 after its largest shareholder Berkshire Hathaway received a regulatory approval to increase its stake to 50% in the company. 

Signify Health soared 32.2% to $28.05 after the bidding war for the home health service provider escalated. 

Amazon.com and UnitedHealth are the latest two to join the bidding war after CVS was said to be looking at the company, according to The Wall Street Journal.  

Tesla Inc declined 2.4% to $868.99 after the electric vehicle maker said it plans to raise the price for its Full Self Driving software by $3,000 to $15,000. 

 

European Markets Plunge 2%

European markets were under pressure amid the ongoing worries of rising rates and the possibility of an extended shut off Russia's natural gas from next week. 

European markets declined and natural gas prices in the region shot up after Russian announced a three-day unscheduled maintenance of the Nordstream 1 pipeline.

The maintenance is scheduled between Aug 31 and September 2.  

The pipeline serves as the main conduit for the flow of natural gas from Russia to Germany and other nations in Europe. 

Markets were on the edge on the worries that the natural gas flow may stop for an extended period as the division between Russia and the European Union. 

The natural gas price for the immediate month delivery at the Dutch TTF hub, the reference price for Europe delivery, soared 22% to $294.60 before falling to $277,87 per megawatt hour. 

The natural gas price contract jumped from the Friday's close of $244.50.   

Moreover, Bundesbank President Joachim Nagel told German newspaper Rheinischen Post that inflation could reach as high as 10%, a 70-year high, this fall if natural gas supplies from Russia continue to fall. 

The benchmark indexes in Frankfurt declined 2.3%, in Paris fell 1.9%, and in London decreased 0.4%. 

The U.K. based Cineworld Group, the parent of the second largest U.S.-based movie theater chain Regal Cinemas, confirmed that the company is considering to file a voluntary bankruptcy in the U.S. and in the U.K. 

Cineworld fell 20% to 3.24 pence in London trading. 

 

Asian Markets Close Down After China Lowered Rates 

Market indexes in Asia generally declined after the return of global rate hike worries and ahead of comments from the U.S. Fed Chair Jerome Powell at a gathering of central bankers this Thursday for three days. 

Central bankers are scheduled to meet at the annual economic symposium organized by the U.S. Federal Reserve in Jackson Hole, Wyoming. 

China's central bank also eased key lending rates to ease pressure on the housing market. 

The People's Bank of China lowered its one-year benchmark lending rate by 5 basis points to 3.65% and 5-year rate by 15 basis points to 4.3%. 

The move was widely anticipated as the second-largest economy is battling lockdown conditions in the north and central China and also facing severe drought in the south. 

The Nikkei 225 index in Tokyo dropped 0.5% but indexes in Hong Kong and Shanghai gained  after China cut its lending rates. 

The indexes in Korea dropped more than 2% and in India declined 1.5% on global rate hike worries. 

The indexes in Australia closed down 0.95% after commodities prices faced headwinds in international trading.