Rising recession fears and uncertainty in the bond and currency markets sent stocks to new 2022 lows last week.
The Dow Jones Industrial Average declined 2.92%, while the Standard & Poor’s 500 slumped 2.91%. The Nasdaq Composite index fell 2.69%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.94%.1,2,3
A Tumultuous Week
U.S. stocks were under pressure all week due to recession concerns and unsettled trading in the bond and currency markets. This stress followed economic steps out of the U.K. During the previous week, the Bank of England (BOE) raised interest rates, and its prime minister announced unfunded tax cuts that the markets interpreted as inflationary.
U.S. bond yields rose early last week, sending stocks lower until Wednesday’s rally following news that the BOE would buy U.K. government bonds. U.S. stocks resumed their descent the following two days to close out a disappointing week, month, and third quarter.
The Bank of England Acts
Global bond and currency markets have been volatile recently due to global central bankers raising interest rates to combat inflation. Developments in the U.K. took center stage last week when the BOE announced it would be buying long-dated U.K. government bonds. Upending the financial markets was the previous week’s announcement of tax cuts by the country’s new prime minister, a step many investors viewed as counterproductive to the BOE’s inflation-fighting efforts.
The BOE’s decision to begin temporary purchases of government bonds was well-received by capital markets, sending U.K. bond yields lower and boosting U.K. stock prices in the immediate aftermath.
This Week: Key Economic Data
Monday: Institute for Supply Management (ISM) Manufacturing Index.
Tuesday: Factory Orders. Job Openings and Labor Turnover Survey (JOLTS).
Wednesday: Automated Data Processing (ADP) Employment Report. Institute for Supply Management (ISM) Services Index.
Thursday: Jobless Claims.
Source: Econoday, September 30, 2022
This Week: Companies Reporting Earnings
Wednesday: Lamb Weston (LW).
Thursday: Constellation Brands, Inc. (STZ), McCormick & Company, Inc. (MKC), Conagra Brands (CAG).
Source: Zacks, September 30, 2022
Footnotes and Sources
2. The Wall Street Journal, September 30, 2022
3. The Wall Street Journal, September 30, 2022
4. IRS.gov, February 23, 2022
5. Downshiftology.com, June 1, 2022
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Berthel Fisher Insights 10-03-2022
October 03, 2022