(Bloomberg) — Stocks slumped as disappointing results from two Wall Street heavyweights added to recession worries, while bets the Federal Reserve will intensify its fight against inflation pushed a dollar gauge to a record.
Traders got another reality check, with JPMorgan Chase & Co.
temporarily halting buybacks as earnings fell short of estimates, and Morgan Stanley announcing a plunge in investment-banking revenues. Both shares sold off, dragging the S&P 500 to its fifth straight day of losses.
Meantime, another hot inflation print bolstered wagers on a full-point Fed hike in July.
Read: Citi Now Sees a 100 Basis-Point Fed Rate Hike in July as Likely
The Bloomberg Dollar Spot Index, which tracks the greenback against a basket of developed- and emerging-market currencies, climbed to its highest since at least 2005.
Short-dated Treasury yields jumped anew, widening the gap between the two- and 10-year benchmarks to the deepest since 2000. So-called inversions are seen as a potential harbinger of a recession.
“Given the Fed has made it SUPER CLEAR that inflation fighting is goal number 1 and they are willing to take recession risk to accomplish that goal, the more persistent inflation, the higher recession risk will go,” wrote Dennis DeBusschere, the founder of 22V Research.
“So, yield curves are inverting or flattening aggressively.”
The three-month London interbank offered rate for dollars notched its biggest increase since 2008, soaring to the highest level in more than three years as traders anticipate larger hikes by the Fed.
Credit defaults are on track to rise in North America, Europe, Asia, and Australia, according to a survey by the International Association of Credit Portfolio Managers, as the risk of global recession mounts.
The economic slump is likely to occur later this year or in 2023, according to the survey.
What to watch this week:
- China GDP, Friday
- US business inventories, industrial production, University of Michigan consumer sentiment, Empire manufacturing, retail sales, Friday
- G-20 finance ministers, central bankers meet in Bali, from Friday
- Atlanta Fed President Raphael Bostic speaks, Friday
Will the eurozone avoid a recession or a debt crisis?
How will the euro and stocks perform in the next six months? Share your views and participate in the latest MLIV Pulse survey. It only takes a minute, so please click here anonymously.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1.9% as of 9:43 a.m.
New York time
- The Nasdaq 100 fell 1.6%
- The Dow Jones Industrial Average fell 2%
- The Stoxx Europe 600 fell 1.6%
- The MSCI World index fell 1.9%
Currencies
- The Bloomberg Dollar Spot Index rose 1.1%
- The euro fell 1.1% to $0.9953
- The British pound fell 1.1% to $1.1761
- The Japanese yen fell 1.4% to 139.28 per dollar
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.00%
- Germany’s 10-year yield advanced six basis points to 1.21%
- Britain’s 10-year yield advanced five basis points to 2.11%
Commodities
- West Texas Intermediate crude fell 5.3% to $91.24 a barrel
- Gold futures fell 2.2% to $1,697.50 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
