US Stocks See Worst Day in Two Months on Weak Data, Surge in Long-Term Inflation Views

Stocks Plunge on Economic Concerns and Inflation Fears

New York, February 24, 2023 - US stocks experienced their worst day in two months as economic data missed expectations and consumer inflation views soared to a 28-year high.

Economic Indicators and Market Reaction

Weak consumer sentiment, housing market indicators, and service sector data unnerved investors on Friday. The S&P 500 lost over 1.5%, while bonds rallied, amid heightened volatility. The expiration of $2.7 trillion in equity and ETF options exacerbated price fluctuations.

Factors Contributing to Volatility

Traders also reacted to a surge in COVID-19 vaccine maker stocks following reports of a new coronavirus study in China. Keith Lerner of Truist Advisory Services attributed the selloff to the confluence of these factors and a "richly valued" stock market.

Market Performance

The S&P 500 fell 1.7%, the Nasdaq 100 slid 2.1%, and the Dow Jones Industrial Average lost 1.7%. The Dow transportation index plummeted 2.6%, while the Russell 2000 dropped 2.9%. The Magnificent Seven megacap index declined 2.5%.

Treasury Market and Volatility

The 10-year Treasury yield fell to 4.43% as traders sought safety amidst lower stock and oil prices. Larry Tentarelli of the Blue Chip Daily Trend Report noted that options expiration could amplify volatility.

Outlook

Analysts expressed mixed views on the market outlook. Gina Bolvin of Bolvin Wealth Management Group warned of a potential correction based on weak data and consumer spending guidance. However, she emphasized that the bull market continued to have a solid foundation. Mark Hackett of Nationwide highlighted a shift in market leadership, with international and value stocks gaining attention.

Goldman Sachs reported a trimming of net positions on Magnificent Seven stocks by hedge funds, indicating increased selectivity. Short interest on S&P 500 stocks has also risen to its highest level since 2020.

Global Markets

European equities attracted substantial inflows, driven by optimism around peace negotiations. Bank of America strategist Michael Hartnett favored global stocks over US peers, citing improving business activity in other regions.

Corporate Developments

* US Justice Department is investigating Medicare billing practices at UnitedHealth Group.
* Coinbase Global settled a lawsuit with the SEC regarding an illegal exchange.
* Apple CEO Tim Cook promised President Trump increased manufacturing in the US.
* B. Riley Financial reassured investors about its financial stability.
* US authorities are investigating a deal between CrowdStrike and an IRS contractor.
* Akamai Technologies missed expectations in its outlook.
* Block's quarterly results fell short of forecasts.
* Booking Holdings posted strong holiday results.
* Rivian Automotive forecast a decline in electric vehicle deliveries for 2025.

Key Market Movements

Stocks:

* S&P 500: -1.7%
* Nasdaq 100: -2.1%
* Dow Jones Industrial Average: -1.7%
* MSCI World Index: -1.3%
* Dow Jones Transportation Average: -2.6%
* Russell 2000 Index: -2.9%
* Bloomberg Magnificent 7 Total Return Index: -2.5%

Currencies:

* Bloomberg Dollar Spot Index: +0.2%
* Euro: -0.4%
* British pound: -0.3%
* Japanese yen: +0.3%

Cryptocurrencies:

* Bitcoin: -3.2%
* Ether: -3.3%

Bonds:

* 10-year Treasury yield: -8bps to 4.43%
* 10-year German yield: -6bps to 2.47%
* 10-year British yield: -4bps to 4.57%

Commodities:

* West Texas Intermediate crude: -3.1%
* Spot gold: -0.1%