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Stock Market News for Aug 18, 2022

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U.S. stock markets closed lower on Wednesday as market participants weighed Fed’s July FOMC minutes. Moreover, retail sales data for July missed expectations raising fear of slowing economic growth. All the three major stock indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) slid 0.5% or 171.69 points to close at 33,980.32, ending a five-day winning streak. Notably, 22 components of the 30-stock index ended in negative territory while 7 in red and 1 remained unchanged.

The tech-heavy Nasdaq Composite finished at 12,938.12, dropping 1.3% or 164.43 points due to weak performance of large-cap technology stocks. The major loser of the tech-laden index was Zoom Video Communications Inc. (ZM - Free Report) as the share price of this company tumbled 6.2%. Zoom Video currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 lost 0.7% to end at 4,274.04. Ten out of the 11 broad sectors of the benchmark index closed in negative zone while one in green. The Communication Services Select Sector SPDR (XLC), the Consumer Discretionary Select Sector SPDR (XLY) and the Materials Select Sector SPDR (XLB) fell 1.9%, 1.1% and 1.4%, respectively.   

The fear-gauge CBOE Volatility Index (VIX) was up 1.1% to 19.90. A total of 10.76 billion shares were traded Wednesday, lower than the last 20-session average of 10.92 billion. Decliners outnumbered advancers on the NYSE by a 4.04-to-1 ratio. On Nasdaq, a 3.04-to-1 ratio favored declining issues.

Fed’s July FOMC Minutes

The Fed reaffirmed its commitment of rigorous interest rate hike until inflation comes down near to its targeted 2%  mark. The central bank has raised the benchmark lending rate from the range of 0-0.25% at the beginning of March to 2.25-2.50% at present. In the successive FOMCs of June and July, the Fed hiked inters rate by 75 basis points, marking the most stringent consecutive action since early 1990s.

Most importantly, Fed Chairman has indicated that the central bank may reduce the magnitude of rate hike going forward if data becomes favorable. According to Powell, “As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.” The next FOMC meeting will be on September.

Moreover, the Fed Chair said that he does not think the economy is in recession or will be in recession in near future. “Think about what a recession is. It’s a broad-based decline across many industries that’s sustained more than a couple of months. This doesn’t seem like that now. The real reason is the labor market has been such a strong signal of economic strength that it makes you question the GDP data,” Powell said.

Economic Data

The Department of Commerce reported that retail sales in July remained unchanged to the last month. The consensus estimate was for a gain of 0.2%. The data for June was revised downward to 0.8% from 1% reported earlier.

A stiff fall in gasoline prices resulted in a decline of 1.8% in pump station receipts. Motor vehicle and parts dealers sales decreased 1.6%. These two major declines were offset by a 2.7% surge in online sales and a 1.5% increase in miscellaneous stores.

The core retail sales (excluding auto) increased 0.4%, surpassing the consensus estimate of 0.1%. June’s data was revised downward to 0.9% from 1% reported earlier. Retail sales excluding auto and gasoline rose 0.7% in July, fell below the previous month’s increment.


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