Monday’s biggest decliners were shares of travel and casino companies
Even after rallying Friday, the S&P 500 has dropped for six consecutive weeks, its longest weekly losing streak since June 2011. The index is down 16% this year.
Among Monday’s biggest decliners were shares of travel and casino companies. Expedia Group,
Caesars Entertainment and Penn National Gaming all dropped 5% or more. The consumer discretionary and technology sectors led the index lower.
Investors, worried that the Federal Reserve has been too late to spot the risks from souring inflation, fear the central bank will move too aggressively to fight it, a mistake that could tip the economy into a recession.
The resulting selloff, which has been compounded by the war in Ukraine and Covid-19 lockdowns in China, has been broad, affecting most assets from cryptocurrencies and stocks to government bonds, leaving investors unsure of where to seek safety.
After weeks of losses, some investors are holding on to stocks, or buying more, hoping declines are reaching their nadir. Others are settling in for a protracted period of volatility.
“We are moving into a more challenging time for markets. We need to see signs that inflation is not just peaking but actually decelerating before you find a sustainable bottom in the market. That is going to take at least a couple of months,” said David Donabedian, chief investment officer at CIBC Private Wealth.
“That doesn’t mean we won’t have counter-rallies higher from day to day, but I think this is a long, drawn-out process and it is largely data-driven,” he said.
Investors are grappling with so many issues—the Russia-Ukraine war, Federal Reserve policy, inflation, China’s economic slowdown—it is hard for them to justify holding any assets for too long, said City Index market analyst Fawad Razaqzada. Most fundamentally, he said, investor confidence has been badly shaken by the selloff.
After Friday’s rally, investors are hoping that at least a temporary bottom has been put in, several analysts said.
But from a broader perspective, the changes in monetary policy and the rise in inflation have fundamentally changed the dynamic between stocks and bonds, said Evercore ISI analyst Julian Emanuel.
Stocks can still go up, he said, but because of rising bond yields, the upside for equities will be “truncated” as opposed to “runaway.”
Among individual stocks, Twitter shares fell $3.33, or 8.2%, to $37.39 on Monday after Elon Musk on Saturday said the company’s legal team accused him of violating a nondisclosure agreement. Mr. Musk Friday said that his $44 billion acquisition of the social-media company was “on hold,” sending the company’s shares down nearly 10%.
Spirit Airlines jumped $2.29, or 13.5%, to $19.27 after Businesshala reported that JetBlue Airways plans to launch a hostile takeover attempt of the discount carrier. JetBlue shares lost 61 cents, or 6.1%, to $9.45.
shares slipped $1, or 0.4%, to $244.04 after the company said it would quit Russia and sell its business there.
In bond markets, the yield on the benchmark 10-year US Treasury note edged down to 2.877% from 2.932% on Friday.
In commodities, US crude oil jumped 3.4% to $114.20 a barrel. The US national average price of regular gas at the pump rose to a high of $4.48 a gallon, according to AAA.
One signal investors are using to gauge a possible bottom is, surprisingly, bitcoin. The cryptocurrency careened last week amid a collapse in the stablecoin TerraUSD and is down about 35% in the year to date. But as bitcoin has become more tightly attached to the wider capital markets, some investors are using its movement as a gauge of speculative appetite, analysts said.
On Monday, bitcoin edged lower, but after last week’s carnage, investors were taking it as a sign of stabilization in the markets, according to some analysts. “Stock investors are definitely watching this,” Stifel‘s
Chief equity strategist, Barry Bannister, said of bitcoin’s moves.
Overseas, the pan-continental Stoxx Europe 600 rose less than 0.1%. In mainland China, major stock indexes fell after weaker-than-expected data showed the economic cost of strict lockdowns imposed to control Covid-19 outbreaks. Retail sales fell about 11% year over year in April and industrial production contracted 2.9% on the same basis, while growth in fixed-asset investment slowed.
The CSI 300 Index, which tracks the 300 largest companies listed in Shanghai or Shenzhen, fell 0.8%, while the broader Shanghai Composite lost 0.3%.
“The April economic numbers have confirmed investors’ concerns about a China slowdown,” said Tai Hui, chief market strategist for Asia at JP Morgan Asset Management in Hong Kong.
Still, US markets have already sold off markedly in recent weeks, partly on concerns about Chinese supply-chain disruptions, so the weak data were unlikely to have much impact on broader global markets, Mr. Hui said.
Elsewhere in Asia, the Nikkei 225 index in Tokyo rose 0.5%, while South Korea’s Kospi Composite edged down 0.3%.
—Rebecca Feng contributed to this article.
Credit: www.Businesshala.com /