Friday, July 22, 2022

US Market Wrap 07/22/2022

- Stocks in the United States fell as disappointing earnings from social media companies and weak economic data fueled recession fears. Treasuries rose as traders reduced their bets on Fed rate hikes, while the dollar fell.

- The S&P 500 fell for the first time in four days, while the tech-heavy Nasdaq 100 trailed major benchmarks, falling 1.8%. Shares of Facebook parent Meta Platforms and Google owner Alphabet fell after Snap's poor results and Twitter's miss raised concerns about online ad spending. Hardware and storage companies including Micron Technology and Western Digital fell after Seagate Technology's earnings miss and weak outlook.

- Despite Friday's churn, the equity market had its best week in a month, reducing the year's market rout to about 17%. Part of the reason for the move is speculation that the worst of the selloff has passed. However, despite a reduction in expectations for Fed aggressiveness next week, concerns about the impact of inflation, rapidly rising interest rates, and recession fears remain.

- In the face of mounting economic concerns, Snap's results have become a barometer for ad spending. There are growing signs that tech firms are bracing for a downturn, with some cutting back on hiring, while Meta has lost roughly half of its value this year due to disappointing revenue forecasts. Next week, Meta and Alphabet are expected to report earnings.

- Treasury yields rose further, highlighting recession fears, pushing the 10-year yield to around 2.7%. According to the S&P Global Flash Composite Purchasing Managers Output Index, US business activity contracted in July for the first time in more than two years.

- As a result, swaps traders reduced their bets on Fed hikes, pricing a 50-basis-point increase in September as more likely than a three-quarter-point move. Swaps for the meeting next week briefly indicated that a 75 basis-point increase was less than certain.

- Meanwhile, German short-term bonds rose as investors reduced their bets on European Central Bank rate hikes following the region's weaker-than-expected PMI data, which fueled fears of a recession.

Written July 22, 2022 by Charbel Constantine

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