Stocks Plunge on Recession Worries

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Thursday closed down -3.25%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -2.42%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -4.02%. 

Stocks on Thursday sold off sharply, with the S&P 500 and Dow Jones Industrials falling to 1-1/2 year lows and the Nasdaq 100 dropping to a 19-month low.  Recession fears roiled U.S. and European equity markets concern that global central banks will need to keep raising interest rates to rein in inflation.  In addition, stock indexes retreated on Thursday’s weaker-than-expected U.S. economic data.

Renewed concerns about the impact of monetary tightening on economic output and asset valuations sparked a selloff Thursday in U.S. and European stocks.  Also, European government bond yields soared after the Swiss central bank on Thursday unexpectedly raised its policy rate by 50 bp to -0.25%, its first increase since 2007, and after the Bank of England (BOE) raised its benchmark rate by 25 bp for the fifth consecutive meeting.  The 10-year German bund yield Thursday jumped to a new 8-year high of 1.928%, and the 10-year UK gilt yield climbed to a 7-3/4 year high of 2.742%. 

U.S. weekly initial unemployment claims fell -3,000 to 229,000, showing a weaker labor market than expectations of a decline to 217,000.

The U.S. Jun Philadelphia Fed business outlook survey unexpectedly fell -5.9 to a 2-year low of -3.3, weaker than expectations of an increase to 5.0.

U.S. May housing starts fell -14.4% m/m to a 13-month low of 1.549 million, weaker than expectations of 1.693 million.  U.S. May building permits, a proxy for future construction, fell -7.0% m/m to an 8-month low of 1.695 million, weaker than expectations of 1.778 million.

Today’s stock movers…

Recession concerns Thursday undercut technology stocks.  Qualcomm (QCOM), Advanced Micro Devices (AMD), Applied Materials (AMAT), Marvell Technology (MRVL), Lam Research (LRCX), and Atlassian Corp Plc (TEAM) closed down by more than -8%.  Also, ASML Holding NV (ASML), Microchip Technology (MCHP), and Micron Technology (MU) closed down by more than -7%. 

Bank stocks were weighed down by recession fears, which would hurt the credit quality of bank customers and likely lead to higher loan losses for banks.  Signature Bank/New York (SBNY) closed down more than -7%.  Also, American Express (AXP) closed down nearly -6% to lead losers in the Dow Jones Industrials.  Capital One Financial (COF) and Discover Financial Services (DFS) closed down by more than -5%. 

Recession fears hammered cruise line stocks Thursday.  Norwegian Cruise Line Holdings (NCLH) closed down more than -11% to lead losers in the S&P 500.  Also, Royal Caribbean Cruises (RCL) and Carnival (CCL) closed down by more than -10%.

Electric vehicle makers slumped Thursday after Jeffries cut its global EV sales estimates for this year and next.  Lucid Group (LCID) closed down more than -11% to lead losers in the Nasdaq 100.  Also, Rivian Automotive (RIVN) closed down by more than -10%, and Tesla (TSLA) closed down by more than -9%.  In addition, Nikola (NKLA) closed down by more than -7%. 

Homebuilder stocks tumbled Thursday after U.S. May housing starts fell more than expected to a 13-month low.  PulteGroup (PHM) closed down by more than -8%.  Also, Lennar (LEN), Toll Brothers (TOL), and DR Horton (DHI) closed down by more than -6%.

Newmont Corp (NEM) closed up more than +3% Thursday to lead gainers in the S&P 500 as a slump in stocks boosted the safe-haven demand for gold mining stocks. Also, the VanEck Gold Miners ETF (GDX) closed up more than +1%. 

Across the markets…

Sep 10-year T-notes (ZNU22) on Thursday closed up by +21 ticks, and the 10-year T-note yield fell -5.3 bp to 3.231%.  T-notes on Thursday recovered from early losses and moved moderately higher after the S&P 500 plunged to a 1-1/2 year low, which sparked safe-haven demand for government debt.  T-notes also found support Thursday from weaker than expected U.S. economic data. In addition, a decline in inflation expectations Thursday gave T-notes a boost after the 10-year breakeven inflation rate dropped to a 3-week low of 2.951%.

T-note prices Thursday initially opened lower on negative carry-over from a jump in European government bond yields.  The 10-year German bund yield climbed to an 8-year high Thursday of 1.928% after the SNB unexpectedly raised its policy rate by 50 bp to -0.25%.  Also, the 10-year UK gilt yield rose to a 7-3/4 year high of 2.742% after the BOE raised its benchmark rate by 25 bp for the fifth consecutive meeting.

• Stocks Plunge on Recession Fears
• Delta Air Lines Flies in the Options Market From Bold Bullish Bets
• Stocks Rally as Fed Chair Powell Soothes Markets
• Stocks Gain as T-Note Yields Fall Ahead of FOMC