June 28, 2022

Stocks Fall and Dow Drops in Choppy Trading to Start June

On Wednesday, Wall Street began a new month, after experiencing a rather volatile one before. However, trading was choppy in the stock market which saw a pullback in US stocks due to worries about the health and growth of the economy. The Dow Jones Industrial Average declined by 0.5%, or 176.89 points, as they reached 32,813.23. At its high, the blue-chip index had gone up by 280 points, while its lowest saw it fall by almost 400 points. There was also a 0.8% decline in the S&P 500 index, as it fell to 4,101.23. A 0.7% fall was also seen in the Nasdaq Composite, as the tech-heavy index fell to 11,994.46.

According to market experts, the first half of the month was likely to see some volatility and it was expected to continue for a decent part of June. This is because there is not likely to be any such information that would help in calming down the market before then. On Wednesday, the biggest losers of the S&P 500 index were financial stocks. There was a 1% decline in both JPMorgan and Chase and Goldman Sachs. The biggest lags were seen in material names that are usually connected to the economic style. There was a 6.1% fall in Mosaic and 7.8% was seen in Albemarle.

Likewise, travel stocks also lost significantly on the same day. There was a 4.5% drop in both United Airlines and Norwegian Cruise Line. Salesforce, on the other hand, saw its share price go up by almost 9.9% after the company announced its results for the first quarter that ended up exceeding expectations. The chief executive of JPMorgan, Jamie Dimon also spoke up about the economy and its future. He said that a ‘hurricane’ could blow through the economy, which negatively impacted investor sentiment.

Speaking at a financial conference, Dimon said that the market need to brace themselves and they had also decided to be conservative where their balance sheet is concerned. Dimon said that one of the biggest worries for them was the possibility of the Federal Reserve hiking interest rates once more to tighten monetary policy. During the coronavirus pandemic, the balance sheet of the central bank had increased to $9 trillion and it plans on reducing it from the start of June. They have already increased interest rates twice and one of these increases was of 50 basis points.

Moreover, the Fed has also indicated that they will continue hiking interest rates in order to combat high inflation. The San Francisco Fed’s President, Mary Daly stated on Wednesday that they would increase interest rates aggressively for quelling inflation. The market is becoming increasingly concerned over the prospect of monetary policy being tightened. Meanwhile, there was also an increase in the US Treasury yield, as increasing interest rates take away the lucrative nature of stocks because future earnings are discounted. Tuesday already saw stocks decline and they continued their decline on Wednesday as well with trading remaining choppy.

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