US stocks closed down on Thursday, with the S&P 500 printing its worst first half of the year since 1970.
Today’s close marked the end of the second quarter, during which investors grappled with the uncertainties of geopolitical unrest, high levels of inflation, Covid-19 lockdowns and a hawkish Federal Reserve. The Dow and S&P 500 closed out their worst three-month period since 2020 while The Nasdaq ended its worst quarter since 2008.
Stock buybacks, meanwhile set quarterly and 12-month records at $281 billion and $985 billion respectively, according to S&P Dow Jones Indices senior index analyst Howard Silverblatt.
As stocks settle after the trading day, levels might still change slightly.
After plunging more than 500 points, the Dow is well off its lows, down only 130 points, or 0.4%
The S&P 500, which was at one point down 2%, is now down just 0.2%
The Nasdaq is still down 0.5% but was much lower earlier in the day.
The S&P 500 is preparing to wrap up its worst first half in more than 60 years.
The last time the index, which is down by over 20% after entering bear market territory two weeks ago, hit such a bad midyear point was in 1962, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
Markets this year have been roiled by a number of unfriendly headwinds: Russia’s war in Ukraine, Covid-19 lockdowns in China, surging inflation and aggressive rate hikes by the Federal Reserve. All of these factors have fueled investor fears of a recession, causing a rush to the exits. The S&P 500 has lost $8.2 trillion in total dollars since the start of the year.
The index is on track to have its worst June since 2008 and its worst quarter since 1970, with all 11 sectors in the red.
In short, things are looking dire. But that doesn’t mean they’ll stay that way.
Bitcoin fell sharply as risk-averse investors continued to fear cryptocurrencies.
The world’s most popular crypto fell more than 4%, at one point tumbling below $19,000. It has lost 60% of its value this year – and it’s one of the better-performing digital coins.
Crypto lender Celsius Network earlier this month said it would suspend customer withdrawals. Coinbase announced layoffs. And crypto experts fear a wider shakeout is yet to come.
An inflation gauge closely followed by the Federal Reserve showed consumer prices remained flat in May, indicating that inflation had yet to abate, despite the central bank’s initial efforts to cool the economy.
The monthly Personal Consumption Expenditures price index increased by 6.3% for the year ended in May, the Commerce Department reported Thursday. That matches April’s reading and suggests that price hikes have taken a breather since hitting a 40-year-high of 6.6% in March.
The latest PCE report comes just three weeks after the Consumer Price Index, another key inflation measure, showed prices rose by 8.6% year-over-year, their highest increase in 40 years.
Dealmaking booms when markets are stable and businesses are feeling good about the economy and access to financing. When conditions deteriorate, confidence flags, and the number of companies going public or pursuing takeovers drops. That’s what is happening now.
Details, details: The number of global initial public offerings, or IPOs, has dropped by 54% so far this year compared to 2021, according to data from Dealogic provided to Before the Bell. Mergers and acquisitions have plunged by 25%.
The drop-off comes as central banks around the world hike interest rates, leading to higher borrowing costs and tighter financial conditions. Decades-high inflation is also feeding recession fears as consumers begin to deplete their pandemic-era savings, roiling markets and generating questions about how long the economic recovery can last.
In this environment, companies that had wanted to execute IPOs or sell their businesses are staying on the sidelines — preferring to wait for a market recovery when they could raise more money from investors.
Well, we’ve reached the half year mark (already, we know) and here’s where we stand.
The S&P 500 is in a bear market and down 20% for the year. If it closes there, it would be the worst first half in 52 years.
That’s not necessarily terrible news for stocks, though: Previous years that were down at least 15% at the midway point to the year got better as the year progressed. In the final six months of those years, stocks rose every single time, with an average return of nearly 24%.
The Personal Consumption Expenditures Price Index, or PCE, is expected to show prices surged 0.7% over the past month – up from 0.2% in April. That’s not the direction we want prices to go, and bad news for the Fed’s favorite inflation indicator.
Prices around the world have risen despite central banks’ actions to raise interest rates to tame inflation. Although so-called core inflation has calmed down, that doesn’t mean much for consumers who still have to pay for the volatile food and energy prices that “core” inflation discounts.
The continued rise in prices has undermined political leaders around the world and has threatened to plunge the global economy into a recession. The continued spread of Covid, the labor shortage, disruptions to the supply chain, the energy crunch and the ongoing Russian invasion of Ukraine are all contributing to rising prices and are beyond the control of any single policymaker to stop.
US stock futures tumbled again Thursday ahead of another key inflation report, as volatility continues on Wall Street. Stocks are set to close out the worst start to the first half of the year since 1970.
Dow futures were down 400 points or 1.3%.
S&P 500 futures fell 1.3%.
Nasdaq futures were 1.8% lower.
It’s not yet clear if the US economy will ever return to its pre-pandemic status, Federal Reserve Chairman Jerome Powell said Wednesday at a central banker forum in Portugal.
“The economy is being driven by very different forces. What we don’t know is whether we’ll be going back to something that looks like, or a little bit like, what we had before,” Powell told a panel that included European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.
The central bank heads, who collectively hold around $20 trillion on their balance sheets, discussed how “new forces” have changed inflationary dynamics and the global economic landscape – perhaps forever.
“I don’t think we’re going back to that [pre-Covid] period of low inflation,” Lagarde said, noting that Russia’s invasion of Ukraine will “change the picture and the landscape within which we operate.”
China’s huge manufacturing and service industries just saw their first month of growth since February, according to surveys published Thursday, as Covid restrictions were eased in many cities.
But the shadow of further lockdowns still looms over the world’s second biggest economy as Beijing sends mixed messages about the best way out of the Covid pandemic.
The Chinese government’s purchasing managers’ index (PMI) for manufacturing — which mainly covers larger businesses and state-owned companies — rose to 50.2 in June, the first time it has crossed the 50 mark since February, according to the National Bureau of Statistics. A reading above 50 indicates that activity is increasing.
