Monday September 26 was another bloody day for the stock market as investors rued rising interest rates and the surging forex debacle on the equity market.
Dow Jones Plunges as Foreign Currency Plunges
On Monday, the Dow Jones Industrial Average was at its lowest as investors expressed concerns over surging interest rates. In addition, the foreign currency instability is pushing the S&P 500 to one of its lowest points for the year.
The Dow Jones Industrial Average shed 0.4% or 120 points. The S&P 500 slumped 0.2%, while the Nasdaq Composite rose 0.4%.
After a sharp rise in casino stock, consumer consumption expenditure boosted the broader market index. Following the announcement that China would permit tour groups in Macau for the first time in almost three years, Wynn Resorts rose 12.9%, and Las Vegas Sands rose 12.5%.
Furthermore, the Federal Reserve’s aggressive rate hike campaign, combined with the United Kingdom’s tax cuts revealed last week, has induced the US dollar to rise.
The Euro fell to its lowest level against the USD since 2002. A rising dollar can harm the profits of US multinational corporations. It can also disrupt global trade, as a significant portion is conducted in dollars.
According to Morgan Stanley’s Michael Wilson, such US dollar power has historically resulted in some financial or economic downturn. Wilson believes that if there is a period for something to break out, now is the time.
Moreover, traders are looking for a break below the S&P 500’s bear market low. The S&P 500’s unhappy ending for 2022 was 3,666.77 in June. It ended Friday at 3,693.23 after momentarily trading below that threshold.
However, the intraday low for the benchmark this year is 3,636.87. The intraday low for the benchmark this year is 3,636.87. Any trading below those levels may result in additional selling in the market.
Last Friday was brutal for the stock market, with the Dow making a new intraday low for the year and closing 486 points lower. Moreover, the S&P 500 briefly fell below its June closing low and finished down 1.7%. The Nasdaq Composite, heavily weighted toward technology, fell 1.8%.
The latest leg down in markets was triggered by another massive rate hike by the Federal Reserve the other week. The Fed noted that they could raise rates to as high as 4.6% before being reduced.
Bond yields jumped after the monetary authority raised interest rates by 75 basis points. Goldman Sachs cut its S&P 500 year-end benchmark to 3,600 from 4,300 on Friday.
In the meantime, rates are going up again on Monday as the 2-year Treasury reached 4.29% at one point during the day.
In another development, JPMorgan’s Marko Kolanovic stated that the market might be nearing a bottom after the Fed-caused sell-off pushed stocks into “very oversold” territory.
As one of Wall Street’s biggest bulls, Kolanovic believes that the inflation front is showing some encouraging signs.
Nonetheless, he predicted that volatility would remain high until the subsequent inflation indicated otherwise.