Major Indexes Drop 4% In August After 4-day Decline

Barry Adams
31 Aug, 2022
New York City

On Wall Street market indexes declined on the last day of August and turned advances into losses as the month progressed.  

Fed skepticism ran deep in early August as many believed that the central bank will slow down future rate hikes and may even begin to lower rates in the second half of 2023. 

Those hopes of a dovish Fed were dashed asides after the Fed Chairman Powell strongly reiterated the Fed's commitment in fighting inflation. 

Investors are increasingly focused on the future rate hikes and worried that the faster rate may accelerate the economic slowdown or even tip the economy into a recession and weaken the labor market conditions. 

Private sector payrolls increased 132,000 in August after expanding 270,000 in July, the latest ADP survey data released Wednesday. 

Economists are also awaiting the release of the non-farm payroll data on Friday from the Bureau of the Labor Statistics. 

The non-farm payrolls are expected to show an increase between 310,000 and 370,000 in August, according to five economists surveyed by Ticker.com. 

Total mortgage applications volume fell 3.7% in the last week from the previous week, the Mortgage Bankers Association reported Wednesday. 

The seasonally adjusted index declined after mortgage rates on 30-year fixed-rate mortgage for 20% down payment increased to 5.80% from 5.65% in the previous week. 

The average mortgage rate was 3.11% a year ago. 

Futures of crude oil prices declined $2.60 to $89.04 a barrel and natural gas eased 5 cents to $8.97 a thermal unit. 

The U.S. Treasury yields rose above 3.1% for the first time since June 29th as interest rates are expected to rise next month by at least 50 basis points.  

The yield on 10-year Treasury notes rose to 3.16% and 2-year notes increased to 3.46%, record high since 2007.   

Canada's economy expanded at 0.8% in the second quarter ending in June, matching the first quarter's rate, and expanded for the fourth quarter in a row. 

The S&P 500 index declined 0.8% to 3,955.0 and the Nasdaq Composite index fell 0.6% to 11,816.20. 

For the month, the S&P 500 index 4.2% and the Nasdaq Composite declined 4.6%. 

Bed Bath & Beyond Inc plunged 20.3% to $9.64 after the company  announced a business and financial restructuring plan. 

The struggling retailer said it plans to close "low performing" 150 stores, eliminate 20% of its corporate and supply chain staff, bringing back merchandise from national brands. 

The retailer also said it "may offer or sell shares" without disclosing the amount, in a regulatory filing with the SEC.  

The retailer also said same store sales are down 26% in the current fiscal quarter ending on August 27. 

Snap Inc rose 98 cents to $10.98 after the operator of the messaging platform said it plans to cut its operating costs and reduce its workforce by 20%. 

The company also plans to stop working on several projects and tools development including its Pixy drone, mapping tool, online games and music library feature. 

Chewy Inc declined 8.1% to $34.35 after the online pet products retailer reported an unexpected profit but lowered its annual outlook. The company said higher prices are forcing consumers to limit purchases to basic products and medicines. 

 HP Inc declined 6.9% to $28.90 after the company reported mixed quarterly results and the company said electronics spending by enterprises and consumers is slowing down. 

 

European Inflation Stays High, Natural Gas Prices Fall 

European markets closed down for the fourth day in a row and extended losses to more than 4% in the week on the rising energy supply uncertainties. 

Natural gas prices eased today after Norway initiated natural gas supplies and Iraq-controlled oil companies said crude oil exports are unaffected despite the civil unrest. 

Investors are also anticipating a hike in the interest rate of at least 50 basis points after central banks escalated the rhetoric in support of higher rates now to cool the rapid price increases. 

The need for a large rate increase was underscored by the latest inflation reports from the eurozone, France and Spain today. 

Euro zone inflation rose to a record high in August as elevated energy prices spread wide and deep in the broader economy. 

Consumer prices inflation accelerated to 9.1% in August from 8.9% in July, the statistics agency of the currency zone eurostat reported Wednesday. 

Core inflation, excluding energy, food, alcohol and tobacco prices, increased to 4.3% in August from 4.0% in July.

Separately, France's inflation declined to 6.5% in August from 6.8% in July and Spain's inflation dropped to 10.3% from 10.7% in the corresponding period, according to data released by statistics agencies of two nations. 

The DAX index edged down 126.18 points to 12,834.29, the CAC-40 index declined 85.16 to 6,125.16, and the FTSE 100 index 77.49 to 7,284.10. 

The DAX and the CAC-40 index declined 4.8 and the FTSE 100 index fell 1.8% in August. 

For 2022, the DAX index fell 19.9% and the CAC-40 declined 15.1%, and the FTSE 100 index dropped 2.9%. 

The euro edged up a fraction to $1.004 and the British pound weakened to $1.1684. 

Brent crude edged up 97 cents to $98.79 a barrel and natural gas prices dropped 9.7% to 240euros per megawatt hours, a two-week low, after Norway began the supply natural gas. 

In London trading, Pearson, Mondi, Smurfit Kappa Group, Ocado and Lloyds Banking Group were among the leading gainers today with a rise between 1% and 3%. 

Shell, BP, and National Grid declined between 1% and 2%. 

In Frankfurt trading, Allianz, Porsche Automobil, Hello Fresh and MTU Aero Engines were among the leading losers with a fall between 2% and 4%. 

Bayer, Munich Re, SAP, Deutsche Bank and Infineon Technologies were among the leading gainers with a rise between 0.5% and 1.4%. 

On the earnings front, investors are awaiting quarterly results on Thursday from Pernod Ricard, Johnson Mathey, Auto Trader Group and Imperial Brands. 

 

Asian Markets Close Lower On China Worries

Asian markets closed lower dragged by China economic growth worries and fresh lockdowns in the second largest economy in the world. 

The Shanghai Composite Index fell 25.08 points or 0.8% to closed at 3,202.14 and the Hang Seng index was nearly unchanged at 19,954.39. 

India's economy rebounded at 13.5% in the second quarter ending in June from a year ago, slower than the 15% growth expectations set by some economists. 

Household consumption accelerated to 25.9% from 14.4% but construction spending growth dropped to 16.8% from 71.3% a year ago. 

Financial markets in India were closed to celebrate Ganesh Chaturthi. 

The Nikkei 225 Index eased 104.05 points or 0.4% to closed at 28,091.53, dropping towards the three-week low after trading in a tight range.

Japan's factory output unexpectedly rose 1.0% in July from the previous month, beating the expectation of 0.6% decline.  

Inpex dropped 3.5% and Japan Steel Works, Sky Perfect JSAT Holdings and Unitika dropped 3%. 

The Korean Stock Exchange's Kospi Index added 21.12 points or 0.9% to close at 2,472.05.