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Stocks added to their recent downswing with another slide in Monday’s intraday trading. Investors continue to pull back as recent hopes of Federal Reserve policy pivot fade.
The Nasdaq (COMP.IND) is leading the decline, down 1.5% or 157 points to reach levels around 10,496. The S&P (SP500) is -1.1%, falling 39 points to around 3,601. The Dow (DJI) is -0.7%, dropping 197 points to 29,100.
The major U.S. equity averages rallied sharply early last week on optimism that the Fed might be ending its interest rate increases sooner than previously expected. However, this view came under scrutiny as the week wore on, culminated in a substantial decline on Friday. The major averages are now on track for their fourth consecutive day of losses.
With Monday’s selling, the S&P 500 has struggled to stay above 3,600, with important support at the 200-day moving average, which sits at 3,594. The index also remains off a 52-week low of 3,585.62.
Ten of 11 S&P sectors are lower, led by Energy and Info Tech, which is dropping as semiconductor stocks struggle due to rules restricting China shipments.
“Despite the ongoing bearish sentiment this year, the AAII stock allocation survey shows a much different picture,” MKM chief technical Jonathan Krinsky said. “The total stock allocation is still 63.4%. The spread between the stock allocation and % bulls is ~36%. This compares to -7% at the 2002 lows and ~3% at the 2009 lows.”
The bond market is closed and there are no economic indicators on the calendar. But Fed vice chair Lael Brainard is due to speak this afternoon.
“After another volatile week, it’s a quieter week for data with one ginormous exception,” Deutsche Bank’s Jim Reid said. “Yes all roads to and from will all center around US CPI on Thursday.”
“Over the last few months Fed expectations have generally risen with this number and markets have consistently sold off,” he said. “However there have been a few strong counter-trend rallies on either the perception of a coming Fed pivot or on hopes of being near peak inflation. All have so far been ultimately reversed but the potential for Thursday to dominate the next few weeks of trading is high.”
Among active stocks, Ford is one of the biggest decliners following its China sales numbers and a downgrade.
