Stock Market News for Oct 11, 2022
U.S. stock markets closed lower on Monday primarily owing to a stiff decline of semiconductor stocks on government’s regulation. Market participants remained worried that a solid labor market will enable the Fed to continue its rigorous interest rate hike policy. Moreover, CEO of a banking behemoth has warned of an imminent recession. All the three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) was down 0.3% to close at 29,202.88. Notably, 17 components of the 30-stock index ended in negative territory while 13 in green. At session’s low, the blue-chip index was down nearly 300 points.
The tech-heavy Nasdaq Composite finished at 10,542.10, sliding 1% or 110.30 points due to disappointing performance of large-cap chip-set manufacturers. The tech-laden index has recorded its lowest closing since Jul 28,2020.
The S&P 500 dropped 0.8% to end at 3,612.39. Seven out of 11 broad sectors of the benchmark index closed in negative territory while four in positive zone. The Energy Select Sector SPDR (XLE), the Real Estate Select Sector SPDR (XLRE) and the Technology Select Sector SPDR (XLK) fell 2.1%, 1.1% and 1.7%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 3.5% to 32.45. A total of 9.66 billion shares were traded on Monday, lower than the last 20-session average of 11.73 billion. Decliners outnumbered advancers on the NYSE by a 2.43-to-1 ratio. On Nasdaq, a 1.79-to-1 ratio favored declining issues.
Semiconductor Stocks Tumble
The Biden Administration has imposed sweeping measurers of export controls imposed on the semiconductor industry. The new proposal will limit U.S. companies selling advanced computing semiconductors and related manufacturing equipment to China.
The new set of export control measures marked a notable departure in U.S. policy toward shipping technology to China since the 1990s.The proposal will force American and international companies that use U.S. technology to stop providing technical support to major Chinese chipset developers.
Following the government’s decision, shares of major semiconductor firms like NVIDIA Corp. NVDA and Advanced Micro Devices Inc. AMD dopped 3.4% and 1.1%, respectively. Both stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Good News is Bad News for Wall Street
Market participants were worried that the Fed will purse it ultra-hawkish monetary policies buoyed by a robust labor market. In its September FOMC meeting, the Fed has raised the median of the Fed Fund rate for 2022 to 4.4% in September from 3.4% in June.
This means, the range of the benchmark lending rate at the end of 2022 will be 4.25-4.5%, indicating 75 basis-point and 50 basis-point interest rate hike in November and December, respectively. Further, the central bank has projected that the median of the benchmark interest rate will reach 4.6% in 2023. Consequently, yields on U.S. government bonds of different maturity spiked significantly.
The ICE Dollar index is currently hovering around its 20-year high level. Economists and financial researchers are concerned that a rising dollar will hurt the sales of U.S. multinational companies as their products will be more expensive in the international markets. Further, the volume of international trade is likely to be impacted as most of these trades are settled in U.S. dollar terms.
Jamie Dimon, the CEO of the global banking behemoth JPMorgan Chase & Co. JPM, has warned that the U.S. economy is likely to enter into a recession in the next 6 to 9 months. Dimon is worried that the recession may not be a mild one due to complete destruction of the global supply-chain system, lingering war between Russia and Ukraine and an ultra-hawkish monetary stance adopted by the Fed and other major central banks.
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