Medicare Agent News: Commodities Are Selling Off Too

Tuesday, June 28, 2022

Commodities Are Selling Off Too

By Nicholas Jasinski | Tuesday, June 28

Debate Rages On. U.S. stock indexes had their worst day in two weeks today, after opening solidly in the green then sliding through the session.

The Dow Jones Industrial Average closed down 490 points, or 1.6%, after being up almost 450 points at its morning highs. The S&P 500 finished 2% lower and the Nasdaq Composite slid 3.1%. Oil prices gained, metals slipped, and grains prices fell (more on that below.)

There was incrementally good news from China overnight, with the world’s second-largest economy halving the quarantine time for foreign travelers into the country. Walt Disney’s Shanghai Disneyland is also set to reopen this week with limited capacity after a several-month closure.

The bad news today was a disappointing June consumer confidence index from the Conference Board. The measure slid 4.5 points from May, to 98.7, falling short of the 101 consensus estimate. Today's reading was the lowest since February 2021.

“Clearly, the Federal Reserve’s more aggressive path towards curtailing inflationary pressures is affecting how consumers view the short-term economic landscape, which continues to move sharply lower,” Quincy Krosby, chief equity strategist for LPL Financial, said today.

Some investors appear to be been focusing on what could go right over the rest of the year. Yardeni Research’s Ed Yardeni listed a few positives in a note this morning: a strong job market, companies buying back their own stock, signs that pessimism had gone too far, and strong bank balance sheets. The latter was in the news again today, as many U.S. financial institutions—including Goldman Sachs, Morgan Stanley, Bank of America, and Wells Fargo—decided to raise their dividends after passing the government’s stress tests. Lina Saigol covered that news here.

On the other hand, the familiar pressures remain, with investors particularly focused on tightening monetary policy and the possibility of a recession. The Federal Reserve is moving aggressively to raise interest rates, having already executed the biggest rate hike in almost 30 years. The central bank is expected to go much further by the end of this year, in a bid to tame the highest inflation in four decades.

That shift has pushed bond yields higher and squeezed stock multiples. Earnings estimates have held up for most individual stocks and sectors, but the concern is that tighter monetary policy could spur an economic downturn, forcing earnings forecasts to fall and pushing stocks even lower.

“Profit margins for the median S&P 500 company will likely decline next year whether or not the economy falls into recession,” wrote Goldman Sachs strategist Ben Snider. "While investors are focused on the possibility of recession, the equity market does not appear to be fully reflecting the downside risks to earnings.”

Indeed, after a terrible start to 2022 and today notwithstanding, investor sentiment toward some of the most beaten-down stocks and sectors has shifted over the past 10 days. The S&P 500 notched its best day since 2020 on Friday, then saw only negligible losses on Monday. Today began the same way, but stocks couldn’t hold on to their early gains.

Optimists believe that a bottom has been found, while pessimists dismissed the market’s strong gains last week as simply a bear-market rally with more pain ahead. That debate wasn't settled today, and won't be for some time.

This Thursday, investors will get a look at U.S. personal-consumption expenditures data, including the Fed’s preferred inflation indicator. Next week brings June employment data, then inflation numbers are out the following week. Second-quarter earnings season is just around the corner, and it could be a volatile one. At the end of July, the Fed meets and is all but assured to continue increasing interest rates.