Closing Comment — Friday, July 01, 2022
DJIA: 31,097.26, up 321.83
S&P 500: 3,825.33, up 39.95
Nasdaq: 11,127.84, up 99.10
Stocks trim weekly losses; Bond yields drop
U.S. stocks staged an afternoon relief rally on Friday as Wall Street attempted to recover from the worst first half performance for the S&P 500 since 1970. The benchmark index reversed early session losses to climb 1.1%, though still posted a 2.2% weekly decline. The Dow jumped 321 points, trimming its five-day drawdown to 1.3%. The Nasdaq Composite added 0.9%, but still notched a weekly loss of 4.1%. Some attributed the day’s volatility to lighter than usual trading volume ahead of the holiday weekend.
Market participants seemed to overlook a disappointing update from the Institute for Supply Management (ISM). Their gauge of manufacturing activity fell to a two-year low of 53.0 in June from May’s 56.1 print. The new orders component contracted to 49.2 versus the prior month’s 55.1, marking the lowest reading since May 2020. Still, the release renewed worries of a looming recession, inspiring Treasuries to extend their recent rally. The yield on the 10-year note slumped 14 basis points (0.14%) to 2.88%, settling 25 basis points (0.25%) below where it ended last Friday (June 24). Meanwhile, the U.S. dollar rose 0.4% against a basket of its peers. In commodities, West Texas Intermediate crude climbed 2.3% to $108.16/barrel as disruptions in Libyan oil exports overshadowed prospects of dimming near-term demand prospects. Meanwhile, the industrial metal copper sank to a 17-month low.
All 11 S&P 500 sectors finished in positive territory, with the Utilities group pacing the gains with a 2.5% advance. Information Technology stocks underperformed on a relative basis, as a downbeat outlook from Micron Technology Inc. weighed on chipmakers.
Midday Comment — Friday, July 01, 2022
DJIA: 30,592.15, down 183.28
S&P 500: 3,763.24, down 22.14
Nasdaq: 10,953.06, down 75.68
Stocks lower midday; yields drop
U.S. stocks are declining near mid-session Friday as investors exhibit a cautious start to the second half of the year. A disappointing update from the Institute for Supply Management (ISM) is in focus, with their gauge of manufacturing activity falling to a two-year low of 53.0 in June from May’s 56.1 print. The new orders component contracted to 49.2 versus the prior month’s 55.1, marking the lowest reading since May 2020.
The S&P 500 is declining 0.6%, while the Dow is losing 179 points. The Nasdaq Composite is falling 0.7%. Worries of a looming recession continue to inspire a perceived risk-off mood, with Treasuries extending their recent rally. The yield on the 10-year note is slumping 15 basis points (0.15%) to 2.87%, on track to decline 26 basis points (0.26%) since last Friday (June 24). The U.S. dollar is gaining 0.5% against a basket of its peers. In other data, construction spending unexpectedly dipped 0.1% in May following a upwardly revised 0.8% rise in April. Separately, a final update on the S&P Global manufacturing Purchasing Managers’ Index (PMI) was upwardly revised to 52.7 from the initial 52.4 print.
Seven of 11 S&P 500 sectors are trading in negative territory, with Technology leading laggards amid a weakness in chipmakers. Micron Technology Inc. is falling 5.6% after providing a downbeat assessment for the current quarter. In other corporate news, Kohl’s Corp. is sinking 21.5% after announcing it has ended talks to sell its business. Breadth is negative on issues by 3:2 on the NYSE and 5:4 on the Nasdaq. Composite NYSE volume is nearly 1.8 billion shares.
Opening Comment — Friday, July 01, 2022
DJIA: 30,775.43, down 253.88
S&P 500: 3,785.38, down 33.45
Nasdaq: 11,028.73, down 149.16
Stocks set for a cautious start to July
U.S. futures are pointing to a lower open on Friday as investors exhibit a cautious start to the second half of the year. Lingering market headwinds related to heightened inflation and aggressive monetary policy tightening remain front of mind. This morning, the Dow is losing 0.4%, while the S&P 500 is down 0.5% in pre-market action. The Nasdaq 100 is trading 0.6% below fair value on the GLOBEX. Trading volume may be light heading into the holiday weekend, which could exacerbate volatility in today’s session. Yesterday, U.S. stocks finished firmly lower, as a disappointing update on consumer spending renewed recessionary concerns. An update showed personal spending, which makes up a large component of US gross domestic product, rose just 0.2% in May. Real personal spending (adjusted for inflation) declined 0.4%, the first negative reading this year. The S&P 500 lost 0.9% and capped its worst start to a year since 1970 with an 8.4% monthly decline. The Dow shed 253 points, extending its June drawdown to 6.7%. Both benchmarks notched their largest quarterly losses since the pandemic-induced slump during the start of 2020, falling 16.5% and 11.3%, respectively. Meanwhile, the Nasdaq Composite lost 1.3% for the day and 8.7% for the month, pushing the index to its worst three-month period since 2008 (-22.4%).
Worries of a looming recession continue to inspire a perceived risk-off mood, with Treasuries extending their recent rally. The yield on the 10-year note is falling eight basis points (0.08%) to 2.94%, on track to decline 19 basis points (0.19%) since last Friday’s (June 24) close. The benchmark yield settled just 15 basis points (0.15%) higher last month after briefly hitting a peak of 3.50% in mid-June following the Federal Reserve’s (Fed) aggressive 0.75% rate hike. On the data front today, the Institute for Supply Management’s (ISM) gauge of manufacturing activity will hit the tape at 10:00am ET, with the figure expected to ease to 54.5 in June from the prior month’s 56.1 print. A final update on the S&P Global manufacturing Purchasing Managers’ Index (PMI) is anticipated to confirm the initial 52.4 reading, which marked a decline from May’s 57.0 figure. Rounding out the docket, construction spending likely climbed 0.4% in May.
In corporate news, chipmaker Micron Technology Inc. (MU) is falling 4.3% after providing a downbeat assessment for the current quarter as the company sees demand for smartphones and PC easing in the back half of the year. Meanwhile, Kohl’s Corp. (KSS) is sinking 15.8% in pre-market trading after announcing it has ended talks to sell its business. The retailer also trimmed its guidance for its fiscal second quarter amid moderating consumer spending.