Stock market closes sharply lower for second straight day on interest rate concerns

Stock market closes sharply lower for second straight day on interest rate concerns

The stock market closed sharply lower for a second straight day on Tuesday, as the strength of the U.S. economy kept investors worried about interest rates. Tuesday’s narrower-than-expected trade gap with the United States in October did not help. Oil, technology and communications stocks led the declines.




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The Nasdaq composite fell 2% while the S&P 500 lost 1.4%. The Dow Jones Industrial Average fell 1%. The Russell 2000 Small Cap Index fell 1.5%.

Volume fell on the NYSE and Nasdaq from the same time Monday, according to early data.

The S&P 500 fell below its 200-day moving average, a key area to watch to gauge market direction. The index suffered its biggest pullback in nearly a month and settled below the 4,000 level.

The yield on the benchmark 10-year Treasury fell 5 basis points to 3.53%.

Crude oil prices plunged 3.3% to $74.36 a barrel.

All 11 S&P sectors fell on Tuesday except for the Utilities sector, which closed up 0.7%. The S&P Communications Sector ETF (XLC) closed down 2.9%, making it the worst performing sector. It was followed by the energy sector ETF (XLE) which fell 2.5% and the technology sector ETF (XLK) which slipped 2.1%.

The stock market falls due to strong economic data in the United States

The US trade deficit widened in October as exports fell due to slowing demand for US energy goods such as oil and natural gas. The goods and services trade deficit widened in October to a seasonally adjusted $78.2 billion, the Commerce Department said Tuesday. That’s up from the revised $74.1 billion in September. But the report wasn’t as bad as the $80.8 billion shortfall expected by Econoday economists.

Economists remained concerned that the strength of the US economy will prompt other central bankers to raise rates at home, which could push the global economy into a recession.

Goldman Sachs (GS) Chief executive David Solomon said on Tuesday the company will likely have to scale back operations as it faces a slowing economy.

“It’s a natural occurrence that so you have to cut in certain areas and pull out, and so we’re thinking about how we’re going to do that,” Solomon said in a speech to The Wall Street Journal. CEO Council Summit. “But of course we will have to reduce our footprint a bit.”

GS stock closed down 2.3%.

High rates mean investors will have to focus on companies

Separately, Jeremiah Buckley, portfolio manager at Janus Henderson Investors, said in his 2023 market outlook on Tuesday that he believes firm-level factors will shape the longer-term progress of U.S. equities.

“High inflation and the powerful response of the Federal Reserve (Fed) now dominate the decisions of many investors,” he said. “As the stimulating environment of the past decade quickly fades, we believe the market will become less thematic and capital appreciation going forward will be driven by multiple factors at the individual company level.”

The Street pegs the likelihood of the Fed raising rates by 0.5% at its meeting next week at 77%. The odds of a 75 basis point hike are 23%, according to CME tool FedWatch.

Exxon Mobil (XOM) fell another 3% and exited its buy zone from an entry at 105.67. The drop came even though CEO Darren Woods said on Tuesday that global demand for oil and gas won’t peak for decades.

Woods said policymakers need to focus on energy affordability and reliability, in addition to tackling climate change. “It’s hard to see progress being made in the short term,” he said.

Exxon CEO gives outlook for oil demand

Woods said the company is not changing its renewable energy investment strategy, as some of its European peers are doing, but will continue to invest heavily in oil and gas projects while reducing its own carbon emissions.

Texas-based electric utility NRG fell a whopping 15% in volume, sitting below the 200-day moving average. The company announced the acquisition of home security firm Vivint for $2.8 billion in cash. NRG Energy escaped from a cutting base on November 7, but that escape failed about a week later. The breakout of the 200-day line – after falling below the 50-day line – leaves the stock in a clear sell situation.

Leader of the Dow Jones MicrosoftShares of (MSFT) fell 2% as Microsoft feared Microsoft would run afoul of antitrust laws in its $69 billion acquisition plans ActivisionBlizzard (ATVI). Activision’s popular “Call of Duty” game will be available on sony‘s (SONY) PlayStation for 10 years if the deal goes through.

The financial giant Dow Jones JP Morgan (JPM) rose 0.2% after the stock was double-repriced by Morgan Stanley analyst Betty Graseck to buy-sell.

Auto area (AZO) fell 2.8% despite better-than-expected results for its fiscal first quarter. The stock is close to a round trip signal. Investors appear to have focused on stocks, which the company says are up 17.6% from the same period last year. This increase was “driven by inflation” and “growth initiatives”, the company said.

GitLab (GTLB) climbed 9.4% after the company reported earnings and sales that easily beat analysts’ estimates. GitLab’s third-quarter sales of $113 million rose 69% while a loss of 10 cents per share was lower than the 16-cent loss in the third quarter of 2021.

chip maker Semiconductor manufacturing in Taiwan (TSM) announced the construction of a second chip factory in Arizona, increasing its investment from $12 billion to $40 billion. TSM stock lost 2.5%. According to reports, Apple (AAPL), Advanced micro-systems (AMD) and Nvidia (NVDA) will be the first to buy the U.S.-made chips from TSM, starting in 2024.

Electric vehicle giant You’re here (TSLA) was trading down 1.4% on Tuesday.

Biotech drops despite corporate news

Targeted therapy (MRTX) fell 23% even though the biotech company said nearly half of patients responded to its lung cancer treatment. The shares triggered the 7% sell rule from a cup base. Investors seemed to wonder if Mirati could undertake traditional chemotherapy. If approved, the drug would compete Amgenby (AMGN) Lumakras.

Royal Caribbean (RCL) fell more than 3% after JPMorgan analyst Daniel Adam downgraded the stock to underweight with a price target of 47.

AeroVironment (AVAV) publishes its second quarter financial results this afternoon. Wall Street analysts expect the drone maker’s revenue to fall even as its unmanned aerial vehicles play a major role in the war in Ukraine.

Costco (COST), GameStop (GME) and Campbell’s Soup (CPB) publishes its results on Wednesday. Thursday, lululemon (LULU) and Broadcom (AVGO) are available.

Costco shares fell below the 50-day line as the retailer continues its steep decline. Meme GME stock also fell below its 50-day line ahead of earnings.

The Innovator IBD 50 (FFTY) ETF fell 2.5%, dragged down by solar stocks Enphase Energy (ENPH) and safety stock Axon Enterprise (AXONE).

Follow Michael Molinski on Twitter @IMmolinski

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