U.S. benchmarks move sharply lower Thursday as second quarter of 2022 winds down

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The S&P 500 finished lower for a fourth straight session on Thursday as U.S. stocks cemented their worst first-half performance since 1970.

How stocks traded
  • The Dow Jones Industrial Average DJIA, -0.82% fell 253.88 points, or 0.8%, to 30,775.43.
  • The S&P 500 SPX, -0.88% dropped 33.45 points, or 0.9%, to 3,785.38.
  • The Nasdaq Composite COMP, -1.33% slumped 149.16 points, or 1.3%, to 11,028.74.

On Wednesday, the Dow rose 82 points, or 0.3% to end at 31,029.31, while the S&P 500 and Nasdaq Composite COMP, -1.33% posted minor losses.

What drove markets

U.S. stocks traded lower in response to yet another batch of data suggesting that consumer spending is weakening in the face of a slowing economy and the most aggressive inflation in four decades.

Personal-consumption expenditures, which tracks consumer spending in the United States, rose 0.2% in May, but when adjusted for inflation, it became a 0.4% decline. The PCE data also included the Federal Reserve’s preferred gauge of inflation, which showed price pressures were somewhat milder than feared last month.

The consumption data arrived on the heels of Wednesday’s downward revision to first-quarter GDP, which showed the contraction during the first three months of 2022 was even larger than previously believed.

“It’s all confirming what a lot of people are seeing which is a deceleration in consumer spending. I don’t believe we’re heading into a recession, or that this is necessarily indicative of a recession…but it is indicative of further weakness,” said Jonathan Golub, chief U.S. equity strategist at Credit Suisse.

Meanwhile, the latest estimate from the Federal Reserve Bank of Atlanta’s GDPNow indicator showed a contraction of 1% for the second quarter.

The weak consumption data also comes on the heels of a handful of disappointing readings on consumer confidence, which has fallen sharply this year.

“Americans are running faster just to stay even. No wonder consumer confidence is in the pits,” said Bill Adams, chief economist for Comerica Bank.

Federal Reserve Chairman Jerome Powell said Wednesday he saw a path back to 2% inflation, but warned there was “no guarantee that we can do that” while sustaining a strong labor market. The PCE measure is the Fed’s preferred inflation gauge.

The S&P 500 closed out its worst first half of a year since 1970 with a drop of 20.6%. Since peaking near 4,800 in early January, the U.S. benchmark stock index has plunged amid investor fears that the Federal Reserve will need to hike interest rates and rein in the money supply so aggressively that it could spark a sharp slowdown in growth — perhaps even a recession — while provoking a rise in unemployment.

The Nasdaq Composite finished the first half down 29.5% and notched its worst first-half performance on record, and its worst quarterly performance since 2008. For the Dow Jones Industrial Average, the first-half drop of 15.3% marked its worst such performance since 1962 (when the average of 30 stocks dropped 23.2% during the first half of the year), while the blue-chip average managed to also score its largest monthly drop since March 2020.

Read: What’s next for the stock market after the worst 1st half since 1970? Here’s the history.

Sentiment has also been hit by Russia’s invasion of Ukraine, which has heightened geopolitical angst and contributed to a sharp rise in food and energy costs.

In other economic data news, initial jobless claims released on Thursday fell 2,000 to 231,000 in the week ended June 25, the Labor Department said Thursday. Economists polled by The Wall Street Journal had estimated new claims would inch up to 230,000 from last week’s initial estimate of 229,000.

Read: These 10 stocks in the S&P 500 have lost $4.1 trillion of investors’ money during the first half of 2022

The yield on the US 10-year Treasury TMUBMUSD10Y, 2.953% was down 11.8 basis points to 2.973%, falling below 3% for the first time in almost a month, as demand for safe-haven assets picked up. Bond yields move inversely to prices. For the quarter, the 10-year yield declined 64.9 basis points, cementing its largest two-quarter decline since 1994.

Deteriorating risk appetite has pushed bitcoin BTCUSD, +7.77% back below $19,000 on Thursday as the pioneering cryptocurrency cemented its worst first-half drop in history.

Adding to trader anxiety is the second quarter company earnings season, which will kick into gear in the next few weeks. Recent reports from consumer-facing companies — such as Bed Bath & Beyond BBBY, -0.40% — have been poorly received.

Other markets
  • Better news emerged from Asia, where a survey of China’s manufacturing sector registered expansion for the first time since March after COVID-19 restrictions were eased. The Shanghai Composite CN:SHCOMP rallied 1.1% in response.
  • The mood in Europe was cautious as well, with the STOXX 600 XX:SXXP, a benchmark index of companies in the euro area, closing down 1.6%, bringing its loss for the quarter to 9%, marking the worst quarter since the onset of COVID two years ago, while the index dropped more than 16% during the first half of 2022, marking its largest two-quarter percentage decline since the first quarter of 2020.
  • The FTSE 100 UK:UKX, an index of the leading U.K. companies, finished 0.2% lower on Thursday, clinching a first-half loss of roughly 1%. For the month of June, the index dropped 3.8%, its largest monthly drop since October 2020.
  • Gold GC00, -0.18% was down 0.6% on Thursday extending its decline for the month of June to 2% as the price of the yellow metal tumbled to its lowest level since February. Meanwhile, the WSJ Dollar index BUXX, +0.12% rose modestly on Thursday, cementing a gain of more than 9% for the year so far, marking the dollar’s strongest start to a year since 2005.
Single stock movers
  • Salesforce Inc. CRM, -3.26% and Walgreens Boots Alliance WBA, -7.27% were the two worst performing Dow components on Thursday, falling 7.2% and 3.3%, respectively.
  • Norwegian Cruise Line NCLH, -3.89%, Carnival Corp. CCL, -2.48% and Royal Caribbean Cruises RCL, -3.08% were all down sharply.
  • Enphase Energy ENPH, +5.74% and Quanta Services PWR, +4.73% were among the best performers on the S&P 500, while Walgreens and Universal Health Services UHS, -6.09% were among the worst.

This article was originally published by Marketwatch.com. Read the original article here.

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