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Dow, S&P 500 eke out gains Friday, but stocks book sharp weekly lossesExternal Link

Major U.S. stock indexes finished mostly higher Friday, eking out gains with a dramatic rally into the closing bell. The bounce allowed the S&P 500 index to narrowly avoid a bear-market finish, while ending the session virtually flat around 3,901. The Dow Jones Industrial Average rose less than 0.1% and the Nasdaq Composite Index shed 0.3%. Stocks have been under sharp pressure this week as a string of big-box retailers from Walmart Inc. to Ross Stores, Inc. reported disappointing quarterly results, raising fears about a potential pullback in spending from consumers as the Federal Reserve looks to cool high inflation by raising rates and reducing its near $9 trillion balance sheet, but without sparking a recession. Market jitters also led investors to look for safety in government debt, with the 10-year Treasury yield falling to 2.785% Friday, retreating for a second week in a row. Bond yields and prices move in the opposite direction. Earlier in the session, the S&P 500 traded into bear-market territory, but required a close below 3,837.25 to make the status official, marking a fall of 20% or more from its Jan. 3 record close. For the week, the Dow recorded a 2.9% decline, its eighth straight weekly decline, and its longest stretch since April 1932, according to Dow Jones Market Data. The S&P 500 shed 3% for the week, while the Nasdaq lost 3.8%.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

Fri, 20 May 2022 20:04:36 GMT
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Market Extra: ‘Growth scare’ permeates U.S. stocks as estimated $5 trillion to $8 trillion of household wealth evaporates in five monthsExternal Link

Four Paws/Agence France-Presse via Getty ImagesAmid a sea of red in U.S. stock markets on Friday, a fundamental shift in investors’ thinking is taking place, one which analysts describe as a “growth scare.”A “growth scare” is characterized by a correction in anticipation of slowing economic growth, even if such a slowdown hasn’t yet been borne out by the data. Dow industrials DJIA are poised for their longest streak of weekly losses in 90 years and the S&P 500 SPX appeared to be on track to close in bear-market territory, as investors flocked to Treasurys and the dollar as safe havens of choice. Friday’s broad-based selloff in equities punished every industry and every stock strategy —- from value and small-cap to growth, as well as the consumer-discretionary, energy, utilities, financial and tech sectors. Economists at JPMorgan Chase & Co. JPM estimate that U.S. household wealth has fallen by $5 trillion to $8 trillion in 2022, driven largely by falling equity prices. And BofA Securities strategists ranked U.S. equities as this year’s worst-performing asset class, as well as the third-biggest loser among global stocks ahead of only Chinese and German equities, based on data through Wednesday. Prior rounds of U.S. stock selloffs this year were largely driven by prospects of rising interest rates from the Federal Reserve, which is attempting to stomp out the highest inflation in four decades. While the risks of a recession or economic slowdown lingered in the backdrop, they hadn’t been brought to the fore. Many in financial markets have remained confident the U.S. can avoid a downturn, or speak of recession risks in terms of the next one to two years. Data released in April shows the U.S. economy shrank 1.4% during the first quarter, mainly because of a record U.S. trade deficit, following a 6.9% surge in GDP in the final three months of 2021. The National Bureau of Economic Research defines a recession as a significant decline in activity lasting more than a few months. But deteriorating stock values and financial conditions may have the potential to hasten the anticipated arrival of an economic downturn, according to some traders.“For a good portion of this year, we saw a positive correlation between equities and bonds: that is, a selloff in equities and selloff on bonds,” said Subadra Rajappa, head of U.S. rates strategy at Société Générale. “Now, we’re seeing a rally in bonds correspond to a selloff in equities. The subtle shift is that bonds are starting to act as safe haven, suggesting a growth scare and the potential for demand destruction that leads to lower growth.’’“Clearly, this week’s price action in stocks stems from earnings guidance and forward-looking guidance on consumer spending, signaling the potential for a retrenchment,’’ she said via phone. Still, Rajappa said she isn’t seeing any “concrete evidence” of a recession in the data, though some slowdown in growth can’t be ruled out. She also foresees no serious risk of recession in the next 12 months. As of Friday, there have been 59 negative earnings-per-share preannouncements issued by S&P 500 companies for the second quarter, and 32 that were positive, according to Refinitiv’s S&P 500 Earnings Scorecard. That compares with 55 that were negative and 28 which were positive a week ago.Read: S&P 500 earnings are another potential `shock’ awaiting financial markets trying to shake off stagflation fears: economistMeanwhile, the flight to safety in government bonds was felt most acutely in the longest-term maturities, sending 10- BX:TMUBMUSD10Y and 30-year rates BX:TMUBMUSD30Y below 2.8% and 3% respectively. Yields drop when demand for bonds goes up. The price action in bonds led to shrinking spreads between the 2-year BX:TMUBMUSD02Y and 10-year rates, as well as between 5-year BX:TMUBMUSD05Y and 30-year rates, which are seen as worrisome signs about the outlook. In addition, the 5-year rate traded above the 10-year yield, inverting that part of the curve. Meanwhile, the ICE U.S. Dollar Index DXY rose 0.5% to 103.24, not far from some of the highest levels in almost 20 years. Over the past two years, since the pandemic began, U.S. household wealth has increased by $30 trillion, Michael Feroli, JPMorgan’s chief U.S. economist, said via phone Friday. In a sense, the market is “giving back a little bit from a period of strong gains and households are generally still probably sitting on unrealized gains over the past year,” he said.  JPMorgan isn’t yet forecasting a recession and expects U.S. growth to remain positive through next year, Feroli said. “But the risks are pretty elevated and over the next two years it’s a coin flip as to whether we go into a recession.”

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

Fri, 20 May 2022 19:08:00 GMT
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Deere stock sinks toward 15-month low as downbeat industry, supply-chain outlook trumps earnings beatExternal Link

Shares of Deere & Co. plunged 14.9% toward a 15-month low in afternoon trading Friday, after the maker of construction, agriculture and forestry equipment beat fiscal second-quarter profit and revenue expectations but warned that headwinds from supply-chain constraints were expected to continue in the coming quarters. While the company affirmed fiscal 2022 sales growth guidance for its business segments, it lowered its outlook for overseas growth in agriculture and turf, and for the forestry and roadbuilding industries. Chief Financial Officer Ryan Campbell said on the post-earnings conference call with analysts that the supply chain related constraints that weighed on its latest quarterly results "will not likely abate during this fiscal year," according to a FactSet transcript. He said the fact that those supply chain constraints come while agriculture demand remains "strong," Campbell added that "we do not see the industry being able to meet all of the demand that exists in 2022." The stock, which was headed for the biggest one-day selloff since it plummeted 19.7% on March 20, 2020, has slipped 9.5% year to date, while the S&P 500 has shed 19.4%.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

Fri, 20 May 2022 19:00:47 GMT
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Gold ends flat Friday, but books first weekly gain in a monthExternal Link

Gold prices closed flat on Friday, but booked a weekly gain, putting an end to the yellow metal's longest streak of weekly losses in four years. Gold for June delivery finished the session virtually unchanged, up just 90 cents, to settle at $1,842.10 an ounce on Comex, as continued volatility in equity markets led the S&P 500 index to trade below the threshold needed for it to enter a bear market. For the week, the most-active gold contract gained 1.8%, snapping a four-week skid that was its longest stretch of weekly losses since August 17, 2018, when it fell for six weeks in a row, according to Dow Jones Market Data.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

Fri, 20 May 2022 17:50:03 GMT
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S&P 500 slips below bear-market thresholdExternal Link

The S&P 500 on Friday traded below 3,837.25, the level that marks a 20% pullback from the large-cap U.S. benchmark's Jan. 3 record close. A finish below that level would meet the traditional definition of a bear market. The S&P 500 was last at 3,837.48 after trading as low as 3,836.35.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

Fri, 20 May 2022 16:39:47 GMT
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