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Wall Street closed sharply lower on Friday following concerns about the future trajectory of interest rate movement. Fed’s upcoming Jackson Hole Symposium scheduled next week also remained market participants’ focus. All the three major stock indexes ended in negative territory. For the week as a whole, these indexes finished in the red, snapping a four-week winning streak.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) dropped 0.9% or 292.30 points to close at 33,706.74. Notably, 24 components of the 30-stock index ended in negative territory while 6 in green. The tech-heavy Nasdaq Composite finished at 12,705.22, tumbling 2% or 260.13 points due to weak performance of large-cap technology stocks.
The S&P 500 slid 1.3% to end at 4,228.28. Ten out of the 11 broad sectors of the benchmark index closed in negative zone while one in green. The Consumer Discretionary Select Sector SPDR (XLY), the Financials Select Sector SPDR (XLF), the Materials Select Sector SPDR (XLB), the Technology Select Sector SPDR (XLK) and the Communication Services Select Sector SPDR (XLC) tanked 2.1%, 2%, 1.8%, 1.8% and 1.6%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 5.3% to 20.60. A total of 10.01 billion shares were traded Friday, lower than the last 20-session average of 10.90 billion. Decliners outnumbered advancers on the NYSE by a 6.06-to-1 ratio. On Nasdaq, a 3.59-to-1 ratio favored declining issues.
Volatility Emerges on Wall Street
After a two-month ,long bull run, volatility has reappeared on Wall Street. Thursday’s sharp decline in shares price of U.S. stocks had several reasons. Investors remained concerned regarding the future path of the interest rate movement after hawkish comment from a few top Fed officials.
St. Louis Fed President James Bullard said that he would “lean toward” a 75 basis point rate hike in September. Richmond Fed President Tom Barkin said the Fed “will do what it takes” to drive inflation back toward its 2% target.
Moreover, market participants remained cautious about the annual Jackson Hole Symposium of the Fed scheduled on Aug 25-27. Though no decision on interest rate hike will be taken in the meeting, the central bank will provide an important indication regarding its near-term policy prescription. This year, policies will be centered around mounting inflation.
Additionally, on Aug 19, the yield on the benchmark 10-Year U.S. Treasury Note climbed 10.8 basis points to 2.987%, marking its highest since Jul 20. The yield on the short-term 2-Year U.S. Treasury Note also rose as this yield is more sensitive to future interest rate increase.
Finally, Friday was the monthly settlement day for $2.3 trillion equity-linked options and index options. Volatility generally remains higher on derivative settlement days. MarketWatch said, “Heavy buying of options has created a buffer for the market by forcing options dealers to buy stocks to hedge their exposure.”
Weekly Roundup
Last week was a disappointing for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – have fallen 0.2%, 1.2% and 2.6%, respectively. All the three large-cap benchmarks recorded their biggest weekly drop since the week ending Jul 1. Concerns regarding the Fed’s future policy prescriptions, several weak economic data and higher stock valuations are primary reasons for last week’s meltdown.
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Stock Market News for Aug 22, 2022
Wall Street closed sharply lower on Friday following concerns about the future trajectory of interest rate movement. Fed’s upcoming Jackson Hole Symposium scheduled next week also remained market participants’ focus. All the three major stock indexes ended in negative territory. For the week as a whole, these indexes finished in the red, snapping a four-week winning streak.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) dropped 0.9% or 292.30 points to close at 33,706.74. Notably, 24 components of the 30-stock index ended in negative territory while 6 in green. The tech-heavy Nasdaq Composite finished at 12,705.22, tumbling 2% or 260.13 points due to weak performance of large-cap technology stocks.
The S&P 500 slid 1.3% to end at 4,228.28. Ten out of the 11 broad sectors of the benchmark index closed in negative zone while one in green. The Consumer Discretionary Select Sector SPDR (XLY), the Financials Select Sector SPDR (XLF), the Materials Select Sector SPDR (XLB), the Technology Select Sector SPDR (XLK) and the Communication Services Select Sector SPDR (XLC) tanked 2.1%, 2%, 1.8%, 1.8% and 1.6%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 5.3% to 20.60. A total of 10.01 billion shares were traded Friday, lower than the last 20-session average of 10.90 billion. Decliners outnumbered advancers on the NYSE by a 6.06-to-1 ratio. On Nasdaq, a 3.59-to-1 ratio favored declining issues.
Volatility Emerges on Wall Street
After a two-month ,long bull run, volatility has reappeared on Wall Street. Thursday’s sharp decline in shares price of U.S. stocks had several reasons. Investors remained concerned regarding the future path of the interest rate movement after hawkish comment from a few top Fed officials.
St. Louis Fed President James Bullard said that he would “lean toward” a 75 basis point rate hike in September. Richmond Fed President Tom Barkin said the Fed “will do what it takes” to drive inflation back toward its 2% target.
Moreover, market participants remained cautious about the annual Jackson Hole Symposium of the Fed scheduled on Aug 25-27. Though no decision on interest rate hike will be taken in the meeting, the central bank will provide an important indication regarding its near-term policy prescription. This year, policies will be centered around mounting inflation.
Additionally, on Aug 19, the yield on the benchmark 10-Year U.S. Treasury Note climbed 10.8 basis points to 2.987%, marking its highest since Jul 20. The yield on the short-term 2-Year U.S. Treasury Note also rose as this yield is more sensitive to future interest rate increase.
Higher interest rate is detrimental to growth sectors like technology. Consequently, shares of technology bigwigs like Apple Inc. (AAPL - Free Report) , Microsoft Corp. (MSFT - Free Report) and Alphabet Inc. (GOOGL - Free Report) declined 1.5%, 1.4% and 2.5%, respectively. All three stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Finally, Friday was the monthly settlement day for $2.3 trillion equity-linked options and index options. Volatility generally remains higher on derivative settlement days. MarketWatch said, “Heavy buying of options has created a buffer for the market by forcing options dealers to buy stocks to hedge their exposure.”
Weekly Roundup
Last week was a disappointing for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – have fallen 0.2%, 1.2% and 2.6%, respectively. All the three large-cap benchmarks recorded their biggest weekly drop since the week ending Jul 1. Concerns regarding the Fed’s future policy prescriptions, several weak economic data and higher stock valuations are primary reasons for last week’s meltdown.