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Awaiting the Smoke to Clear Ahead of 3-Day Weekend
Friday, June 17, 2022
We begin the final trading day of the worst week on the market indices since March 2020 — the dawn of the pandemic. This current leg down appears to illustrate the dawn of the recession, though we don’t have the data yet to justify negative growth for a second-consecutive quarter. Ahead of the Juneteenth holiday for the markets Monday, it appears we could all use a break.
The Dow and S&P 500 are at 18-month lows — at or near technical bear territory (-20% from highs), whereas the tech-heavy Nasdaq is -33% just from the first of the year. In the past five trading days alone, we see the Dow -5.5%, the S&P -6.8%, the Nasdaq -7% and the small-cap Russell 2000 -9.5% — just in the past week!
The ensuing rebound in pre-market activity this morning is tepid at best: the Dow is +100 points, the Nasdaq +55 and the S&P +15 points. This officially puts the Dow back above the psychologically pleasing 30K level, but the damage has been done. Now that we have priced-in a full recession, we’ll spend the long weekend hopefully letting the smoke clear in order to see a path forward.
Industrial Production figures for May are out this morning, with the headline coming in at +0.2% — half the +0.4% expected. This is the weakest monthly read since September 2021, when we saw -1.2% on the headline. Today’s print also comes in 7x lower than the previous month’s upwardly revised +1.4%, and represents +5.8% growth year over year.
Capacity Utilization for May, which comes out in tandem with Industrial Production, reached 79.0% on headline — a tick up from the downwardly revised 78.9% for April, but below the 79.3% analysts had been expecting. This is a good headline number, though — we’re back up to where we were in late 2018/early 2019.
Futures have slipped even during the writing of these past couple paragraphs: the Dow is now +30 points, the Nasdaq is +10 and so is the S&P. Will we add insult to injury with yet another day down in the markets? At this point, how much more could it hurt?
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