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Worst 1H Since 1970 Ends Trading Day in the Red

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It’s been the worst first half of a year for equity markets in more than half a century. So why should the final trading day of it be anything but down? The Dow, finishing its worst trading month since March 2020 lost another -0.80% today, while the S&P 500, posting its worst 1H since Nixon was sending troops into Cambodia, fell -0.86%. The Nasdaq, -30% in just the first half of this year, lost another -1.33% today. The small-cap Russell 2000, -0.82%, posted its worst 1H ever.

Basically, we’ve just seen the past year and a half of stock-market gains go up in smoke. Fears of a hard landing in the economy as the Fed continues to raise interest rates to fight inflation continue into the second half of the year, so we’ve got that to look forward to. In any case, lots of the forward-looking puffed-up outlooks have been successfully taken out of the market going forward. But at what point will we regain traction?

Walgreens Boots Alliance (WBA - Free Report) led the Dow components lower today, -7.27%, following the release of its fiscal Q3 results: while slightly beating on the bottom line, posting 96 cents per share, the pharma and home products retailer missed revenue estimates slightly in the quarter. Comps sales were up slightly, but U.S. business fell -7% from this time a year ago. The company announced yesterday it will not be spinning off its European-based Boots chain. For more on WBA’s earnings, click here.

After the bell today, chip-maker Micron (MU - Free Report) beat fiscal Q3 expectations on its bottom line — $2.59 per share versus $2.44 expected — while missing modestly on sales — $8.64 billion from $8.66 billion — but falling DRAM demand helped the company drastically lower estimates on both top and bottom lines for its Q4. The Zacks consensus had earlier expected $2.71 per share on $9.29 billion in revenues, but now he company guides to $1.63 per share and $7.2 billion, respectively. This guidance sent shares way down in late trading, but have buoyed partly back since.

If we’re looking for good news, there is some: in this morning’s Personal Consumption numbers, we saw a big pullback for the month of May. Moves like this will eventually begin showing up in future inflation data. China finally looks ready to re-emerge from its self-imposed Covid restrictions and begin to again contribute to growth and key supply chain avenues. Two-year and 10-year bond yields have both sunk beneath 3% (though separated by single-digit basis points, which we’d rather not see), indicating the bond market is taking into account the cooling economy.

In short, it may not be pretty, but economic changes are underway. If we son’t know what the end result will be, that’s reason enough for the market to sell off. But as elements begin to come into focus, we’ll start removing some of these question marks and perhaps start replacing them with black ink. Here’s to a stronger 2H 2022!

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