Losses Persist in Stock Market as Interest Rate Uncertainty Lingers

UTC by Benjamin Godfrey · 3 min read
Losses Persist in Stock Market as Interest Rate Uncertainty Lingers
Photo: Depositphotos

Government bond yields remained high with the two-year treasury adding 1.04% and the 10-year note hitting a high of 1.87%.

Volatility rocks the US stock market on Thursday as losses engulfed the major averages despite showing bullish momentum earlier in the session.

The Nasdaq Composite (INDEXNASDAQ: .IXIC) plunged 1.3% to 14,154.02, an unprecedented turn for an index that grew almost 2.1% before the session closed. The S&P 500 (INDEXSP: .INX) was dragged down below the 4,500 benchmarks for the first time since October last year atop a 1.10% drop to 4,482.73. The Dow Jones Industrial Average (INDEXDJX: .DJI) was also not spared from the bearish volatility as it was pressed 0.89% lower to 34,715.39, as the 30-stock average closed below its 200-day moving average for the first time since December 2021.

The late hour selloffs in tech stocks were observed by Bespoke Investment Group in its recent notes to clients.

“On average, US equities have rallied into lunch time, but there’s also been heavy selling late in the session,” the firm said. “Late-day declines that are much worse than average in a given month do not typically lead to underperformance going forward.”

Amongst the biggest losers on Thursday is Peloton Interactive Inc (NASDAQ: PTON) which tanked 23.93% to $24.22 after the company shared the news it will stop producing its connected fitness equipment on grounds of low demands. Microsoft Corporation (NASDAQ: MSFT) managed a small loss of 0.57% to $301.60, helped by investors’ optimism that its potential acquisition of Activision Blizzard Inc (NASDAQ: ATVI) for $69 billion will be ratified by the necessary regulators.

Government bond yields remained high with the two-year treasury adding 1.04% and the 10-year note hitting a high of 1.87%.

“Investors need to be aware that 2022 probably will be a much rougher ride,” said Ryan Detrick of LPL Financial. “With rate hikes coming and the historically volatile  midterm year on the horizon, more violent ups and downs could be in store for investors this year.”

Stock Market Losses and Increasing Jobless Claims

The overall bearish losses in the stock market are notably affecting America’s job counts. Data from the Department of Labor for the week ended January 15 shows the number of jobless claims was pegged at 286,000, up from the 231,000 reported for the previous week and way ahead of the Dow Jones estimate of 225,000.

“The surge in jobless claims and drop in existing home sales has lead to some easing 10-year bond yields which could reflect some reduction in the degree the Fed could tighten – certainly dampens speculation of a 50 [basis point] rate hike in March,” said Kathy Bostjancic, chief US economist at Oxford Economics. “Moreover we are in for more volatile markets due to the heightened degree of uncertainty surrounding the economic, inflation, and interest rate outlook.”

The negative sentiments in the markets are not going to last forever and are likely to be overturned in a dramatic manner. Based on this, investors are going to be better off when they do not panic sell their pots on grounds of potential interest rate hikes.

“The economy and markets can and do adjust to changes in interest rates,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “This environment is a normal part of the cycle and one we see on a regular basis. The current trend is perhaps a bit faster than we’ve been seeing, but it is a response to real economic factors—and, therefore, normal in context.”

Business News, Indices, Market News, News, Stocks
Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.

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