What you need to know…
The S&P 500 Index ($SPX) (SPY) on Friday closed down -1.72%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.66%.
Stocks on Friday sold off sharply, with the S&P 500 and Nasdaq 100 falling to 3-month lows and the Dow Jones Industrials dropping to a 1-3/4 year low. Soaring global interest rates Friday sparked heavy long liquidation pressure in the stock market. The 10-year T-note yield Friday jumped to a 12-year high of 3.825%, the UK 10-year gilt yield jumped to an 11-year high of 3.848%, and the 10-year German bund yield rose to a 10-year high of 2.112%.
Stocks are being undercut by concern that the Fed’s resolve to fight inflation will push the economy into recession. The recession fears also hammered commodity prices, with crude plunging more than -5% Friday to an 8-month low, which fueled a sell-off in energy stocks.
Friday’s U.S. economic news was hawkish for Fed policy and bearish for stocks. The Sep S&P Global U.S. Manufacturing PMI unexpectedly rose +0.3 to 51.8, stronger than expectations of a decline to 51.0.
A report from Bank of America Friday said EPFR information shows that investors moved $30.3 billion into cash, while global equity funds saw outflows of $7.8 billion, and global bond funds lost $6.9 billion in the week through Sep 21.
Goldman Sachs cut its year-end target for the S&P 500 to 3,600 from 4,300, saying a dramatic shift in the outlook for interest rates will weigh on valuations for U.S. equities.
Today’s stock movers…
A plunge of more than -5% in WTI crude oil Friday to an 8-month low hammered energy stocks and energy service providers. APA Corp (APA) closed down more than -11% to lead losers in the S&P 500. Also, Marathon Oil (MRO) closed down by more than -10%, and ConocoPhillips (COP), Devon Energy (DVN), Diamondback Energy (FANG), Hess Corp (HES), Halliburton (HAL), and Schlumberger (SLB) closed down more than -8%. In addition, Phillips 66 (PSX) closed down by more than -7%, and Valero Energy (VLO) closed down by more than -6%. Finally, Chevron (CVX) closed down more than -6% to lead losers in the Dow Jones Industrials.
Soaring interest rates Friday weighed on technology stocks after the 10-year T-note yield rose to a 12-year high. DXC Technology (DXC) closed down by more than -9%, and Netflix (NFLX) and Tesla (TSLA) closed down by more than -4%. Also, Amazon.com (AMZN) closed down by more than -3%. In addition, Qualcomm (QCOM), Palo Alto Networks (PANW), Intel (INTC), Advanced Micro Devices (AMD), Analog Devices (ADI), Datadog (DDOG), and Zscaler (ZS) closed down more than -2%.
Cruise line operators tumbled Friday on recession fears and growing hurricane activity in the Atlantic Ocean. Carnival (CCL) closed down more than -6%. Also, Norwegian Cruise Line Holdings (NCLH) and Royal Caribbean Cruises (RCL) closed down by more than -6%.
Costco Wholesale (COST) closed down more than -4% Friday, despite reporting Q4 EPS of $4.20, above the consensus of $4.14, after Stifel said it expects the stock price to remain choppy amid uncertainty about the health of the global consumer and heightened inflation.
FedEx (FDX) closed down more than -3% Friday after forecasting Q2 EPS of $2.75, below the consensus of $2.80, citing uncertain economic conditions.
Domino’s Pizza (DPZ) closed up more than +3% today after BMO Capital Markets upgraded the stock to outperform from market perform.
Equifax (EFX) closed up more than +1% Friday after Autonomous initiated coverage of the stock with a recommendation of outperform.
Across the markets…
Dec 10-year T-notes (ZNZ22) on Friday closed down -4 ticks, and the 10-year T-note yield fell -2.5 bp to 3.689%. Dec T-notes Friday plummeted to a nearly 14-year nearest-futures low, and the 10-year T-note yield soared to a 12-year high of 3.825%.
T-note prices Friday remained under pressure from Wednesday when the Fed signaled a steeper interest rate hike path. In addition, Fed Chair Powell said the FOMC sees risks to inflation weighted to the upside, and the committee seeks to return to "sufficiently restrictive" interest rates. Also, a surge in European government bond yields Friday undercut T-note prices as the 10-year UK gilt yield rose to an 11-year high and the 10-year German bund yield rose to a 10-year high.
T-notes recovered nearly all their losses Friday after a sharp sell-off in stocks boosted the safe-haven demand for T-notes. Also, a more than -5% slump in crude oil prices Friday reduced inflation expectations and was supportive of T-notes.
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