Wall Street Gloom Sinks Averages to New 2022 Lows as Global Sell-off Continued

Barry Adams
11 Oct, 2022
New York City

Benchmark indexes reversed morning gains and closed down ahead of the consumer price inflation report on Wednesday. 

The S&P 500 index traded near the 2022 low and the Nasdaq Composite index dropped to a new low in the year and traded near the level last seen in July 2020. 

Both indexes declined for the fifth day in a row and bond yields rose after the Bank of England Governor Andrew Bailey said that the emergency program in support of the bond market will stop on Friday as previously announced. 

The S&P 500 index decreased 0.7% to 3,588.84 and the Nasdaq Composite index declined 1.1% to 10,426.19. 

Crude oil futures for the immediate month declined $2.54 to $88.56 a barrel but natural gas rose 15 cents to $6.59 a thermal unit. 

Lumber price jumped nearly 5% to close at $475 per thousand board feet, a three-week high but still remained down about 38% in the year so far. 

Bond market was on the edge ahead of the inflation report, and the yields on short term maturities continued to outpace longer dated Treasury debts. 

The yield on 2-year Treasury notes edged up to 4.31%, 10-year Treasury notes fell to 3.94% and 30-year Treasury bonds dropped to 3.92%.

 

Stock Movers 

Tech stocks led the decliners on the worries that elevated inflation may support the Federal Reserve's case in lifting rates, depressing the value of future earnings. 

Energy complex stocks also declined after crude oil fell 3.5% and traded near $87 a barrel.  

Casino stocks were under pressure after China reimposed stringent mobility restrictions in mega cities after a week of national holiday following the flare of coronavirus in several provinces. 

Las Vegas Sands Corp dropped 7.7% to $36.28 and Wynn Resorts Ltd plunged 8.3% to $58.80. 

Leggett & Platt, Inc dropped 7.7% to $32.01 after the diversified manufacturing company lowered its full-year earnings and sales outlook citing macroeconomic headwinds. 

Uber Technologies declined 11.1% to $24.45 and Lyft Inc dropped 12.8% to $11.17 after the Labor Department proposed a new rule that could lead to gig-workers reclassification as regular employees. 

 

European Markets Extend Losses 

European markets extended losses for the fifth day in a row on the rising tensions in Ukraine. 

Investors are worried that the aggressive rate tightening is likely to depress corporate earnings and dip the economy into a recession and inflation may remain elevated longer than expected. 

The DAX index declined 0.4% to 12,220.25, the CAC-40 index decreased 0.1% to 5,833.20 and the FTSE 100 index dropped 1.1% to 6,885.23.  

The euro traded near 97.77 U.S. cents and the British pound closed at $1.117. 

The yield on 10-year German government bonds rose to a 11-year high and the Bank of England expanded its bond market intervention to include inflation-linked bonds. 

German bund yields rose after reports suggested that German Chancellor Olaf Scholz is prepared to back European Union-wide joint debt issuance to tackle the surging costs of energy imports. 

G7 leaders conducted a virtual meeting and discuss additional steps after Russia stepped up its bombing across Ukraine following an attach on a bridge linking Ukraine and Crimea. 

The yield on 10-year German bonds was nearly unchanged at 2.29%, French bonds closed down 2.885%, British Gilt at 4.41% and Italian bonds to 4.663%. 

Brent crude oil declined 1.8% to $94.49 a barrel and TTF natural gas price edged up a fraction to 154.50 euros a megawatt hour. 

 

British Pound Falls, Gilt Yields Rise 

The British pound is expected to face more selling and the U.K. bond yields are likely to surge in Wednesday's trading after the BoE Governor Bailey said emergency bond purchase plan will end in three days as planned at a meeting in Washington. 

The announcement gives pension fund managers three days to unwind positions held in the Liability Driven Funds management.  

The Bank of England has been supporting long-dated UK government bonds through an emergency bond purchase program and keeping the yields lower and stable, however at a cost of about 65 billion pounds.  

The program was put in place on Sept 28 and expanded on October 10th to a daily bond purchase limit of