Closing Stock Market SummaryIt was another rough showing for the stock market today. It was a rough showing for the bond market, too, which was the main driver of stock market action.
The S&P 500 and Dow Jones Industrial Average both fell below their June 16th closing lows (3,666.77 and 29,688.78, respectively) and the DJIA broke below its intraday low (29,653.29) from the same day. The DJIA closed below the June low while the S&P 500 was able to climb above its June low by the close.
Treasury market volatility was the biggest headwind for equities today, followed by recession concerns. The level yields hit was worrying, but the pace at which they got there was the bigger concern. The 2-yr note yield rose as high as 4.26% (it began the week at 3.85%) and the 10-yr note yield went as high as 3.82% (it began the week at 3.45%). They settled at 4.21% and 3.70%, respectively.
A policy move out of the UK acted as another headwind today. The Prime Minister announced the biggest package of tax cuts since 1972 in order to help drive stronger economic growth. That news pushed the 10-yr UK gilt yield up 36 basis points to 3.85%, as market participants recognize it will be financed through the issuance of more debt at a time of rising interest rates. Also, there were concerns that efforts to spur stronger growth will keep inflation rates elevated.
The aforementioned policy move sent the British Pound plummeting (GBP/USD -3.4% to 1.0868 ) and the US Dollar Index on tear, up 1.5% to 112.96.
Another factor in play for participants today was Goldman Sachs cutting its year-end price target for the S&P 500 to 3,600 from 4,300, and acknowledging it sees potential downside to 3,150 in the event of a hard landing.
Price action today brought many stocks down. The advance-decline line reflected a strong selling bias. Decliners led advancers by a 7-to-1 margin at the NYSE and a 3-to-1 margin at the Nasdaq.
Small and mid cap stocks suffered heavier losses than their larger peers. The Russell 2000 closed down 2.5% and the S&P Mid Cap 400 closed down 2.1%.
All 11 S&P 500 sectors logged losses that ranged from 0.5% (health care) to 6.8% (energy). Energy fell far behind its peers as energy complex futures suffered sharp losses on concerns about a global slowdown. WTI crude oil futures fell 5.7% to $78.69/bbl. Unleaded gasoline futures dropped more than 7.0% to $2.32/gal.
Looking ahead to Monday, there is no U.S. economic data of note.
Today's economic data was limited to the preliminary September IHS Markit Manufacturing PMI reading, which came in at 51.8 (prior 51.5), and IHS Markit Services PMI reading, which was 43.7 (prior 43.7).
Dow Jones Industrial Average: -18.6% YTD
S&P Midcap 400: -21.21% YTD
S&P 500: -22.5% YTD
Russell 2000: -25.2% YTD
Nasdaq Composite: -30.5% YTD