S&P 500 posts worst first half since 1970 | Financial Markets News


The selloff in shares deepened after weak consumer-spending information fueled worries a couple of recession, with the S&P 500 struggling its cruelest first-half since Richard Nixon’s presidency.

It was a rout for the historical past books, with the benchmark gauge down 21% within the first six months of the yr — essentially the most for such a span since 1970. The superlatives stored piling up throughout Wall Avenue, with 10-year US yields plunging to about 3% from a decade-high of three.5% in mid-June. The greenback had for its greatest quarter since 2016. The almost 60% drawdown in Bitcoin for the reason that finish of March was the most important for the reason that third quarter of 2011.

US shopper spending fell for the primary time this yr, suggesting an financial system on considerably weaker footing than beforehand thought amid fast inflation and Federal Reserve hikes. A view that central banks must act quick as a result of they misjudged inflation has roiled markets, with merchants ramping up bets the financial system will buckle beneath aggressive tightening.

“The stagflation that has gripped our nation proper now’s going to make it robust on the inventory market over the intermediate time period,” stated Matt Maley, chief market strategist at Miller Tabak. “When demand just isn’t the important thing motive why inflation is an issue, a slower financial system just isn’t going to assist carry inflation down as a lot as some specialists appear to suppose.”

Key segments of the world’s largest bond market — such because the distinction between 5 and 10-year yields — have inverted, signaling bets that increased charges will harm the financial system. Inversions have usually preceded recessions by about six to 18 months, in keeping with information compiled by Bloomberg.

S&P 500 fell in first half of 1970, but rebounded in second half

After a tough first half of the yr, July will likely be pivotal for the longer term path of markets amid company earnings, key inflation information and the Fed assembly, in keeping with Greg Marcus, managing director at UBS Non-public Wealth Administration. He says volatility will in all probability stay elevated till there’s proof that inflation is moderating, recession dangers are receding and geopolitical threats are declining.

Over the previous few months a technique that had labored nicely for a decade has been met with contemporary lows out there. Merchants have shunned the “buy-the-dip” mantra whereas embracing the “sell-the-rally” mode. Because of this, the S&P 500 entered a bear marketplace for the second time since 2020, having plunged over 20% from its January peak.

However dismal efficiency just isn’t a sign of what’s to come back. The US fairness benchmark misplaced 21% within the first half of 1970, throughout a interval of excessive inflation that the present surroundings has been in contrast with. It gained 27% over the last six months of that yr.

“We’re going to have a double-digit return between now and the tip of the yr,” Jonathan Golub, head of US fairness technique at Credit score Suisse, instructed Bloomberg Tv. “We don’t have a revenue downside as a lot as folks say.”

Earlier this week, Goldman Sachs Group Inc. strategists famous that US revenue margin estimates are manner too optimistic, placing shares susceptible to extra declines when Wall Avenue analysts downgrade their expectations. Morgan Stanley’s Lisa Shalett stated Monday analysts want a actuality test about their earnings projections for this quarter.

Elsewhere, oil suffered its first month-to-month slide since November as OPEC+ accomplished the return of output that it halted in the course of the pandemic. Gold dropped for a 3rd straight month.

What to look at this week:

  • Eurozone CPI, Friday
  • US building spending, ISM Manufacturing, Friday

A number of the essential strikes in markets:

Shares

  • The S&P 500 fell 0.9% as of 4 p.m. New York time
  • The Nasdaq 100 fell 1.3%
  • The Dow Jones Industrial Common fell 0.8%
  • The MSCI World index fell 1%

Currencies

  • The Bloomberg Greenback Spot Index fell 0.4%
  • The euro rose 0.4% to $1.0481
  • The British pound rose 0.4% to $1.2173
  • The Japanese yen rose 0.6% to 135.74 per greenback

Bonds

  • The yield on 10-year Treasuries declined seven foundation factors to three.02%
  • Germany’s 10-year yield declined 18 foundation factors to 1.34%
  • Britain’s 10-year yield declined 16 foundation factors to 2.23%

Commodities

  • West Texas Intermediate crude fell 3.6% to $105.82 a barrel
  • Gold futures fell 0.6% to $1,807.30 an oz.

–With help from Andreea Papuc, Denitsa Tsekova, Cecile Gutscher, Lu Wang, Elaine Chen, Isabelle Lee, Vildana Hajric and Enrique Roces.

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