From American markets falling lower as the Federal Reserve announces increasingly aggressive interest rate hikes to Treasury yields hitting a whopping 14-year high, the stock market is as fast-moving and adrenaline-pumping as always.
While economic uncertainty is still prevalent, the latest stock market news contains some noteworthy events that United States of America and global investors should consider before making any portfolio decisions.
U.S. Stocks Lower Amid Federal Worries of Aggressive Interest Rates
Thursday, October 20, 2022, saw the U.S. stocks close lower following recent labor market data and notes from an official at the U.S. Federal Reserve reinforced predictions that the central bank will aggressively raise interest rates in response to an upshot of healthy corporate earnings.
Earlier in the session, stocks rose, thanks to gains of 4.73% experienced by IBM after they exceeded their earnings estimates on Wednesday, October 19, 2022. During the same period, AT;T Inc. boosted 7.72% following the company’s annual profit forecast raise.
Unfortunately, stocks weren’t able to hold their substantial gains as weekly jobless claims skyrocketed, and the president of the Federal Reserve Bank of Philadelphia, Patrick Harker, agreed with potentially recession-inducing hikes.
Harker claims the Fed isn’t finished raising the short-term rate targets.
Dow Jones Falls as Netflix Earnings Skyrocket
The Dow Jones Industrial Average fell early Wednesday, even though Netflix experienced impressive quarterly earnings. Chip equipment makers and airlines stocks also came out on top, closely followed by Tesla.
The third-quarter earnings rollout continued, with Baker Hughes, ASML, Intuitive Surgical, United Airlines, Travelers, and Procter & Gamble publishing results.
ASML shares boosted over 4%, and United Airlines topped revenue views for a 5% hike, while Baker Hughes experienced a plus 7% increase. And Intuitive Surgical announced third-quarter earnings and sales results exceeded expectations, causing their shares to leap 11% once the market opened.
However, the tech titans, Microsoft, and Apple, were lower after the opening, experiencing less-than-favorable results. Meanwhile, P&G stocks managed to rally by 2.7%, and Travelers received a 1.1% raise.
Following the opening bell on Wednesday, the Dow Jones Industrial Average dropped by 0.2%, alongside the S&P 500, which lost 0.6%.
The market has undergone various rally attempts, putting intense psychological strain on savvy investors. Experts suggest new and established investors keep watchlists close by to take advantage of follow-through day breakouts.
Although, it’s important to note that not every follow-through has the desired result. Buying too soon or too aggressively can cause frustration. Therefore, the smartest investors slowly and methodically raise exposure.
Treasury Yields Hit 14-Year High
As of October 20, 2022, Treasury yields have hit a 14-year high, causing U.S. stocks to finish lower for the second day, negating the aforementioned rise.
Premarket trade fell in response to the ultra-high treasury yields. However, the stocks managed to recover some lost ground as quarterly earnings proved better than anticipated for many.
The senior director of applied research at Qontigo, Christoph Schon, states that the correlation between stocks and bonds should concern multi-asset investors. They are moving in the same direction, which hasn’t happened for years.
While yields are rising sharply and suddenly, Treasurys aren’t a safe haven, they’re attractive. Recently, more investors have moved into exchange-traded and bond funds due to the increasing yield — so much so that experts suggest investors may begin to see them as a genuine equity alternative.
On top of that, the British Prime Minister, Liz Truss, submitted her resignation, helping push the Great British Pound higher against the U.S. dollar.
U.S. Investors Start to Leave Fear Behind
Finally, according to the CNN Money Fear and Greed Index (a measure of the present market sentiment), U.S.-based investors’ fear levels are slowly decreasing.
Even though stocks have lowered for two consecutive sessions, the major indices still boast plus 2% for the overall week.
Investors are awaiting sales and earnings reports from Verizon Communications, American Express Company, and HCA Healthcare, Inc. to decide how they should move forward.
Either way, the Index showed a move from 36.0 to 40.0, which still puts investors in the “fear” zone, just not as intensely as in previous readings.