Wall Street closed lower on Thursday, crossing the finish line of a bleak month and quarter in what was the bleak code for the S&P 500’s worst first half in more than half a century.
All three major U.S. stock indexes ended the month and second quarter in negative territory, and the S&P 500 recorded its sharpest percentage drop in the first half since 1970.
The Nasdaq experienced its biggest percentage drop in January-June, while the Dow experienced its biggest percentage drop in the first half since 1962.
All three indexes showed the second quarterly decline in a row. The last time this happened was in 2015 for the S&P and Dow and in 2016 for the Nasdaq.
The year began with a spike in COVID-19 cases due to the Omicron variant. Then came Russia’s invasion of Ukraine, decades of high inflation, and aggressive interest rate hikes by the Federal Reserve, raising fears of a possible recession.
“It has been a tug-of-war all year between inflation and slower growth, balancing tightening financial conditions to address inflation issues but trying to avoid open panic,” said Paul Kim, CEO of Simplify ETF in New York. “I think we are most likely already in a recession and right now the only question is how tough will it be?”
“I think it’s very unlikely that we’ll see a soft landing,” Kim added.
Economic data released on Thursday did little to allay those fears. Disposable income fell a few inches, consumer spending fell, inflation remained high, and jobless claims rose a few inches. read more
“We’ve started to see a slowdown in consumer spending,” said Oliver Perche, senior vice president of Wealthspire Advisors in New York. “And it seems like inflation takes its toll on the average consumer, and that drives corporate earnings, which ultimately drives the stock market.”
The chart below shows the yearly rise in core inflation rates, each suggesting that while it appears to have peaked in March, they all continue to rise well above the Fed’s average annual target of 2%:
The Dow Jones Industrial Average (.DJI) fell 253.88 points, or 0.82%, to 30,775.43, while the S&P 500 (.SPX) fell 33.45 points, or 0.88%, to 3 785.38 points and the Nasdaq Composite (.IXIC) rose 149.16 points, or 1.33%, to 11,028.74.
Eight of the S&P’s 11 major sectors closed lower, with Utilities (.SPLRCU) leading the gains and Utilities (.SPNY) posting the largest percentage loss.
But the energy sector was the only major sector to show growth since the beginning of the year, helped by higher oil prices due to supply problems due to the Russian-Ukrainian conflict.
Major stock indexes lost ground in June, and the S&P 500 recorded its biggest percentage decline in June since the financial crisis.
The Q2 reporting season will begin in a few weeks, and 130 S&P 500 companies have already announced this ahead of time. Of these, 45 were positive and 77 were negative, according to Refinitiv data, bringing the negative/positive ratio to 1.7 more than in the first quarter but less than a year ago.
Worry about inflation, which reduces consumer demand and threatens profits, will force market participants to listen carefully to forecasts.
Shares of Walgreens Boots Alliance Inc (WBA.O) fell 7.3% as its quarterly earnings fell 76% on Florida opioid settlements and lower US pharmacy sales due to lower demand for COVID-19 vaccines. 19.
There were more declining issues on the NYSE than rising issues at a ratio of 1.75 to 1; on the Nasdaq, a ratio of 1.52 to 1 favored the decline.
The S&P 500 recorded one new 52-week high and 42 new lows; The Nasdaq Composite recorded 17 new highs and 367 new lows.
Volume on US exchanges was 12.58 billion shares, compared with an average of 12.86 billion over the past 20 trading days.