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End of Day Brief - Friday June 18 - Markets drop on Fed hawkish talk

Dow33290.08-533.37(-1.58%)
Nasdaq14030.38-130.97(-0.92%)
SP 5004166.45-55.41(-1.31%)
10-yr Note +6/321.441
NYSEAdv 828 Dec 2396 Vol 2.7 bln
NasdaqAdv 1283 Dec 2821 Vol 6.0 bln


Industry Watch

Strong: Consumer Discretionary
Weak: Financials, Energy, Utilities, Consumer Staples


Moving the Market

-- Market continued to reprice reflation narrative amid hawkish-sounding Fed comments

-- Treasury yield curve flattened noticeably

-- S&P 500 closed below its 50-day moving average (4182)

-- Value/cyclical stocks underperformed


S&P 500 falls below its 50-day moving average

Dow -533.37 at 33290.08, Nasdaq -130.97 at 14030.38, S&P -55.41 at 4166.45

[BRIEFING.COM] The S&P 500 declined 1.3% on this quadruple witching-options expiration Friday, as the market continued to reprice the reflation narrative while investors digested some hawkish-sounding Fed comments. The Russell 2000 fell 2.2%, the Dow Jones Industrial Average fell 1.6%, and the Nasdaq Composite fell 0.9%.

Things turned sour prior to the open after St. Louis Fed President Bullard (FOMC voter in 2022) told CNBC that he was one of the seven FOMC officials on Wednesday that expected a rate hike next year and that the Fed shouldn't be involved in mortgage-backed securities. Mr. Bullard was previously viewed as one of the more dovish Fed members.

In addition, Mr. Bullard's comments served as a reminder that the Fed is cognizant of rising inflation pressures and is determined to ensure that they're transitory. In turn, the inflation-sensitive 10-yr yield fell six basis points to 1.45%, while the fed-funds-sensitive 2-yr yield rose four basis points to 1.27%.

This curve-flattening activity was a major headwind for the S&P 500 financials sector (-2.5%), which was joined by the energy (-2.9%) and utilities (-2.6%) sectors as laggards with declines over 2.0%. The consumer discretionary sector (-0.5%) outperformed on a relative basis with a 0.5% decline.

A clearer representation on the stock market action was the 2% decline in the iShares S&P 500 Value ETF ($IVE 143.60, -2.74, -1.9%), which extended its weekly decline to 4.1%. Value/cyclical stocks received no love from investors in an environment where inflation/growth rates could be peaking as the economy moves past the initial reopening phase and the Fed sounds less dovish.

Selling efforts did accelerate more broadly into the close amid an absence of a buy-the-dip mindset, dragging both S&P 500 and Russell 2000 below their 50-day moving averages. This was the first time since early March that the S&P 500 closed below the key technical level.

On the upside, Adobe ($ADBE 565.59, +14.23, +2.6%) and PayPal ($PYPL 283.38, +5.27, +1.9%) were notable outperformers today. Adobe beat top and bottom-line estimates and issued upbeat guidance. PayPal plans to raise its U.S. fees in August, according to Reuters.

The U.S. Dollar Index increased 0.4% to 92.26. WTI crude futures rose 0.8%, or $0.60, to $71.67/BBL.

Investors did not receive any economic data on Friday, and they won't receive any notable data on Monday, either.

  • Russell 2000 +13.3% YTD
  • S&P 500 +10.9% YTD
  • Nasdaq Composite +8.9% YTD
  • Dow Jones Industrial Average +8.8% YTD

Source: (Briefing.com)

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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