Tuesday, June 14, 2022

US Market Wrap 06/14/2022

- A late-day rally in technology stocks pulled equities away from session lows, but trading morale remained shaky, with fears that the Federal Reserve's tough attitude to combat stubbornly high inflation will send the world's largest economy into recession.

- The S&P 500 recovered some of its losses, but still closed lower for the fifth session in a row, their longest losing streak since January. The tech-heavy Nasdaq 100 rose as Oracle's (ORCL) projection indicated that the push to migrate clients to the cloud is finding traction. Two-year yields have reached levels not seen since 2007. The dollar rose, the yen fell to a 24-year low, and the pound fell to its lowest level since March 2020.

- Traders were cautious ahead of the US Federal Reserve's decision on Wednesday, and a 75-basis-point boost, the largest since 1994, is now almost fully priced in. Two-year rates have risen more than 60 basis points in just three days, the biggest since 1987. The 10-year real yield, which excludes inflation, has surged to pre-pandemic levels, wreaking havoc on cryptocurrencies and money-losing tech firms. A key section of the US curve inverted briefly, raising fears that tighter monetary policy will have a greater impact on the economy.

- According to the Bank of America's monthly fund manager survey, investor fears of stagflation are at an all-time high, while global growth optimism is at an all-time low. Global profit expectations have also fallen to 2008 levels, according to BofA strategists, who point out that previous troughs in profits expectations occurred during big Wall Street crises like the Lehman Brothers collapse and the dot-com bubble explosion.

- The smart money ditched stocks at the quickest rate in history, sending the S&P 500 into a bear market after plunging more than 20% from its all-time high. Goldman Sachs' prime broker tracked hedge funds offloaded US equities for the seventh day in a row on Monday, with the dollar amount of selling over the last two sessions rising to levels unseen seen since the firm's prime broker started recording the data in April 2008.

- It's the S&P 500's fourth bear market in the last two decades, and history indicates that it will take time for US stocks to recover. While the COVID-19-fueled bear market of 2020 recovered quickly, other bear markets took significantly longer to recover. Between 2000 and 2002, the index plunged 51% from peak to trough, and 58% during the global financial crisis. It took more than 1,000 trading days in both of those cases to recoup the losses.

- The operator of a crucial texas LNG export terminal said it could take three months to partially restart the plant after a fire last week, sending US natural gas futures plunging and European prices soaring.