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22/08/22 Briefing




Ahead of Fed Chair Powell's speech at the Jackson Hole Economic Policy Symposium on Friday, the stock market moved distinctly lower with the major indices closing just above session lows. Broad-based selling was fueled by rising Treasury yields and the lingering feeling the market is due for a pullback after July's upside moves.

The latter point was reflected by the price action seen in the meme stocks, like AMC Entertainment (AMC 10.46, -7.56, -42.0%) and Bed Bath & Beyond (BBBY 9.24, -1.79, -16.2%), which saw huge downside moves. These stocks were beneficiaries of speculative excess during the recent rally, but are now suffering from the speculative excess being wrung out of their stock prices while facing some additional company specific drivers. The material losses proved to be a risk-off factor, as they undercut sentiment and weighed on most stocks in today's session.

The 10-yr note yield pushing above 3.00% today also helped fuel selling efforts. The 10-yr note yield rose five basis points to 3.04% while the 2-yr note yield rose eight basis points to 3.33%.

The selling was broad-based, leaving many stocks lower, but mega caps and growth stocks were notably weak. The Vanguard Mega Cap Growth ETF (MGK) closed down 2.6% versus a 2.1% loss in the Invesco S&P 500 Equal Weight ETF (RSP) and the S&P 500. The Russell 3000 Growth Index (-2.4%) closed behind the Russell 3000 Value Index (-2.0%).

S&P 500 sector performance reflected broad selling interest and also downside leadership from mega caps. Every sector closed with losses ranging from 0.3% (energy) to 2.8% (consumer discretionary). Consumer discretionary (-2.8%), information technology (-2.8%), and communication services (-2.7%), home to key mega cap names, brought up the rear.

Energy (-0.3%) closed ahead of its peers after WTI crude oil futures pared session losses on a Bloomberg report, citing Saudi Oil Minister Prince Abdulaziz bin Salman, who said the disconnect between the futures market and supply fundamentals might force OPEC+ and its allies to act. WTI crude oil futures settled 0.2% lower at $90.63/bbl after dipping below $87.00/bbl earlier in the session.

The People's Bank of China cut its 1-year loan prime rate by five basis points to 3.65% and its 5-yr loan prime rate by 15 basis points to 4.30%. The design of that policy move is to stimulate growth; however, it was probably not lost on market participants that the basis for the rate cut is a weakening economy.

JD.com(JD), KE Holdings (BEKE), Macy's (M), Dick's Sporting Good (DKS), Medtronic (MDT), and J.M. Smucker (SJM) all report earnings ahead of tomorrow's open.

Looking ahead to Tuesday, market participants will receive July New Home Sales (Briefing.comconsensus 580,000; prior 590,000) at 10:00 a.m. ET. The August IHS Markit Manufacturing PMI preliminary reading (prior 52.2) and IHS Markit Services PMI preliminary reading (prior 47.3) are out at 9:45 a.m. ET.

Dow Jones Industrial Average: -9.0% YTD S&P 400: -11.3% YTD S&P 500: -13.2% YTD Russell 2000: -14.7% YTD Nasdaq Composite: -20.9% YTD

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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures