S&P 500 Drifts to New 2022 Low, Treasury Yields Advance

Barry Adams
27 Sep, 2022
New York City

Early morning momentum dissipated after two hours of trading and major averages struggled to climb back into positive territory. 

The U.S. Treasury 10-year yield rose to a high not seen at least in a decade as investors adjust to more rate hikes at the next two remaining meetings of the Fed's policymakers. 

Tech stocks led the gainers on the hopes that the recent sell-off was overdone. 

The S&P 500 index decreased 0.3% to 3,697.26 and extended losses to the sixth day in a row and the Nasdaq Composite index added 0.2% to 10,820.59. 

The S&P 500 index is down 24% and the Nasdaq Composite index is below 31.6% in the year so far.  

Tesla, Amazon, Apple, Microsoft and Visa gained between 0.5% and 2%. 

Energy complex stocks also gained after crude oil rebounded 2%. 

Exxon Mobil, Chevron, Hess Corp and Schlumberger added between 1% and 2%.   

Crude oil gained $1.87 or 1.8% to $78.57 and natural gas decreased 18 cents to $6.71 a thermal unit. 

The yield on 2-year Treasury notes edged down to 4.30%, 10-year Treasury notes inched higher to 3.973% and 30-year bonds increased to 3.85%.  

Home builders dropped at least 1% following the rise in bond yields on the worries that mortgage rates may reach as high as 7% in the first-half of 2023.

 

U.S. Stock Movers 

Energy stocks traded higher after crude oil rebounded 2% from its nine-month low to $78.69 a barrel.

Exxon Mobil, Hess Corp, Schlumberger and BP plc gained between 1% and 2%.

Cracker Barrel Old Country Store, Inc rose 0.7% to $98.44 after the restaurant chain operator reported revenue in the fourth quarter ending on July 29th rose 5.9% to $830.4 million.

Comparable restaurant sales increased 6.1% and retail sales rose 3.0%.

Net income in the period decreased 8.0% to $33.4 million from $36.4 million a year ago.

For the fiscal year, revenue rose $3.3 billion from $2.8 billion a year ago and net income plunged 48% to $131.8 million from $254.5 million a year ago.

Hertz Global Holdings Inc increased 2.4% to $16.20 after the rental car company announced a partnership with BP Plc's electric vehicle charging unit to place thousands of charging stations to power the company's fleet.  

Jabil Inc increased 1.2% to 56.86 after the electronics manufacturing services provider said revenue in the quarter ending in August increased to $9 billion from $7.4 billion a year ago.

Net income increased to $315 million from $175 million and diluted earnings per share rose to $2.25 from $1.75 a year ago.

The company guided fiscal first quarter 2023 revenue to increase 9% from a year ago in the range between $9 billion and $9.6 billion and diluted earnings per share between $1.65 and $2.05.

The company also announced a buyback plan of up to $1 billion of its own stock over the next two years.

United Natural Foods Inc dropped 1.8% to $37.77 after the food wholesaler said revenue in the fourth quarter ending in July rose 8.0% to $7.3 billion.

Net income decreased 9.3% to $39 million from $43 million and diluted earnings per share fell to 63 cents from 69 cents a year ago.

For the fiscal year 2022, net sales increased 7.3% to $28.9 billion and net income increased 66.4% to $248 million from $149 million or $4.07 from $2.48 a year ago. 

 

New Home Sales Soar In August 

Single-family new home sales in August rose unexpectedly, according to the latest report from the U.S. Commerce Department Tuesday. 

Home sales soared 28.8% to an annual rate 685,000 from the revised rate of 5.6% decline to 532,000 in July. 

Home sales rate has been steadily declining since hitting the high of 839,000 in December 2021 and dropped to a low of 532,000 in July, matching the March 2016 data.  

Median home price in August was $436,800, a decline of 6.3% from $466.300 but 8.0% higher from $404,300 a year ago. 

Last week, the National Association of Realtors said existing home sales declined for the seventh month in a row in August but the pace of decline eased to 0.4% to 4.8 million from the previous month's fall of 5.7% to 4.82 million in July. 

 

U.S. Durable Orders Fall in August 

Seasonally adjusted durable goods orders fell on a monthly basis 0.2% in August following the revised 0.1% decline in July, the U.S. Census Bureau reported Tuesday. 

The new orders not adjusted for seasonal factors surged 10.9% from a year ago.  

On a monthly basis, excluding transportation, new orders increased 0.2% and excluding defense,  new orders decreased 0.9%.

 

Europe Battles Rising Inflation, Rates and Dollar

In Europe, benchmark indexes advanced after investors searched for beaten down stocks in financials and energy sectors. 

The DAX index increased 0.6% to 12,299.50, the CAC-40 index added 0.7% to 5,810.25 and the FTSE 100 index inched higher 0.1% to 7,028.24. 

European markets lacked direction as investors worried that rapid rise in interest rates may dip the economy into a recession without killing the high inflation. 

Natural gas prices rebounded in Amsterdam trading and the TTF gas price futures for the immediate month delivery increased as much as 12% before cooling to 8.5% gain to 188.34 euros a megawatt hour. 

Brent crude oil also rebounded 2.9% from a nine-month low to $86.56 a barrel. 

The U.S. dollar paused its year-long advance and the euro traded at 96.25 cents and the British pound edged up to $1.77. 

The British pound is expected to test its parity with the U.S. dollar and the euro in the coming weeks as the island nation struggles with rising cost of energy imports, falling government revenues and rising sovereign borrowing. 

Currency traders are anticipating the pound to drop as low as 93 U.S. cents if the Bank of England fails to intervene and lift interest rates in an emergency meeting. 

 

Asian Markets Rebound from Extended Losses

Asian markets closed higher in a cautious trading as indexes in Japan and China rebounded but in India and Australia edged lower. 

The Nikkei 225 index increased  0.5% to 26,571.87, while the broader Topix closed 0.5% higher at 1,873.01.

The Bank of Japan carried out an unscheduled operation to curb currency speculation and control the rapid decline in yen and Finance Minister Sunichi Suzuki cautioned currency traders to avoid speculative bets. 

The People's Bank of China injected more liquidity to financial system and dampen the rising stress in dollar-renminbi trades.

The central bank added $24.7 billion in the repo market ahead of the end of the quarter. 

The Sensex index in India edged down for the fifth day in a row and fell 37.70 points or 0.07% to 57,107.52 and the Nifty index 8.90 points or 0.05% to 17,007.40.

The Indian economy is one of the few bright spots in the world, most developed economies are heading to a recession and emerging markets are battling sharp currency devaluations. 

A mix of global economic slowdown and elevated inflation has kept investors on edge in India, despite the encouraging domestic economic scenario.

Moreover, India is expected to benefit as more companies look to relocate from China and diversify their manufacturing base. 

The Shanghai Composite Index jumped 1.4% to 3,093.86, while Hong Kong's Hang Seng Index gained fractionally to close at 17,860.31.