Wall Street: S&P 500 closes worst half since 1970, down -20.6% – Heavy losses for Dow, Nasdaq

Wall Street ended its worst six-month performance in more than half a century on Thursday amid a “perfect storm” of inflationary pressures, tightening monetary policy by central banks, a pandemic slowdown in China and Russia’s war of aggression in Ukraine – in an explosive combination that is intensifying fears of an impending global recession.

On the dashboard, the industrial Dow Jones fell by 253.88 points or 0.82%, to 30,775.43 points, with the broadest S&P 500 to record a drop of 33.45 points or 0.88%, to 3,785.38 points, while the technological Nasdaq “lost” 149.16 points or 1.33%, to 11,028.74.

On a H1 level, the Dow lost 15.3%, the S&P 500 lost 20.6%, while the Nasdaq lost 29.5%.

For the second quarter, the Dow fell 11.2%, the S&P 500 fell 16.4% and the Nasdaq fell 22.4%.

At the June level, the respective losses were 6.7%, 8.4% and 8.7%.

Both the Dow and the S&P 500 thus ended their worst quarter since the first quarter of 2020, which was marked by the start of the coronavirus pandemic. The Nasdaq posted its worst quarterly performance since 2008.

The overall S&P 500 posted its worst showing since the first half of 1970.

“We’ve had an unprecedented pandemic that has stopped all economic activity worldwide and an unprecedented response, both fiscal and monetary,” Stephanie Lang, chief investment officer at Homrich Berg, told CNBC. “So the perfect storm of surging demand and supply chain disruptions has been created, and now there is inflation the likes of which we haven’t seen in decades, with a Fed caught asleep. Now the market is forced to adjust to the new reality, which the Fed is also trying to adjust to by slowing growth,” he added.

A spike in bond yields, as well as historically high stock prices, led to a sharp drop in technology stocks, with investors abandoning “growth” stocks for more traditionally strong sectors. Rising interest rates make future profits – as promised by the “growth” company – less attractive.

With the Nasdaq more than 31% off its fall 2021 highs, stocks like Netflix have lost as much as 71% of their value since the start of 2022, while those of Apple and Alphabet are down about 23 % and 24.8% respectively. Facebook parent Meta has lost 52% of its value.

Healthcare stocks were hit on Thursday, with Universal Health Services shares down 6.1%, pushing sentiment lower on its disappointing quarterly results, with shares of HCA Healthcare, Abiomed and Viatris to also record losses of more than 3%.

Shares in the cruise industry were also negative performers, after Morgan Stanley cut its target price for Carnival (noting that its value could even disappear completely), with the stock ultimately losing 2%. Royal Caribbean and Norwegian Cruise Line each posted losses of more than 3%.

For the Federal Reserve’s part, Cleveland branch president Loretta Mester told CNBC on Wednesday that she would support another 75 basis point increase in the key interest rate at the July monetary policy committee meeting if current trends in the economy are not reversed. Already in June, the Fed raised interest rates by 75 basis points, the largest percentage increase since 1994.

“We do not expect the stock market to bottom out and we see prospects for further decline. Investors need to maintain high cash levels this season,” said George Ball, president of Sanders Morris Harris, who estimates that at the end of the downturn, S&P 500 will move to 3,100 units.

However, according to Courtney Garcia, senior wealth advisor at Payne Capital Management, although inflation is now peaking, it is ultimately expected to remain high for longer than expected, but there are still good opportunities for investors now.

Among the 30 Dow stocks, 8 moved with a positive sign and 22 with a negative sign. The gains were led by those of Travelers Cos., Procter&GambleHoneywell, while of the losses those of Walgreens Boots Alliance, Salesforce, Caterpillar.

USA: Small decrease in new applications for unemployment benefits

The number of new applications for unemployment benefits in the US decreased slightly last week, but remained higher than the limit of 200,000 recorded from February to March, in a sign that the historic cycle of monetary policy tightening has opened. The Fed may have begun to influence the strong labor market.

In particular, new applications for unemployment benefits fell by 2,000 in the week ended June 25 and reached the seasonally adjusted number of 231,000, according to data released by the US Department of Labor on Thursday.

Economists in a poll by The Wall Street Journal expected it to reach 230,000.

The four-week average for new unemployment benefit applications rose to 7,250 to 231,750, a slight uptrend in recent weeks.

The number also recorded a slight decline of continuing unemployment benefitswhich fell by 3,000 to the seasonally adjusted number of 1.33 million benefits, returning to pre-crisis levels.

It remained unchanged in May Federal Reserve’s preferred inflation indicatorwith the structural index that does not include food and energy slowing down from the previous month to an encouraging development that may indicate further price de-escalation thereafter.

In particular, the price index for personal consumption expenditures rose 0.6% in May from the previous month, after rising 0.2% in April, according to data released by the US Department of Commerce.

From May 2021, the index strengthened by 6.3%, after a similar increase in the previous month.

Excluding food and energy, the construction index rose 0.3% for the fourth consecutive month, while from the same period last year it rose 4.7% after rising 4.9% in April. The latest measurement is the smallest increase since last November.

Government data also showed that consumer spending rose 0.2% in May, while April figures were revised downwards by 0.6% from 0.9% initially announced. Analysts’ average estimates in a Reuters poll were for a 0.4% increase in consumer spending.