Markets nosedive to new yearly lows

Dow tumbled 483 but above session lows, decliners overwhelmed advancers 9-1 & NAZ slumped 198.  The MLP index sank 12+ to the 196s & the REIT index dropped a big 4+ to the 384s while interest rates were rising sharply.  Junk bond funds remained weak along with other debt & Treasuries closed with a little buying for the new, high yields.  Oil sold off 4+ to the 78s & gold gave back 29 to 1651 (more on both below).

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Stocks fell sharply, bond yields rose & the $ strengthened today as investors heeded the Federal Reserve's signal that its battle with inflation could result in much higher interest rates & a recession.  The sell-off was global, in a week where the Fed boosted rates by another 3-qtrs of a point & other central banks raised their own interest rates to combat global inflation trends.  The S&P 500 & Dow were careening toward a new low close for 2022 & European markets were down more, along with the UK FTSE, German DAX & French CAC were also were sharply lower.  Weak PMI data on manufacturing & services from Europe today & the Bank of England's warning yesterday the country was already in recession added to the negative spiral. The UK gov also shook markets today with the announcement of a plan for sweeping tax cuts & investment incentives to help its economy.  As the US stock market opened, Treasury yields were off their highs & other sovereign rates eased as well.  The UK gov's announcement of a sweeping plan to cut taxes added to turbulence in that country's debt and hit British sterling hard.  The US 2-year Treasury was at 4.19%, off a high above 4.25%.  Bond yields move opposite price.

What’s behind this latest selloff in financial markets

For the businesses that survived the worst of the Covid-19 pandemic shutdowns & supply chain issues, the economic recovery brought back customers willing to spend.  But, more recently, business-owners have had to contend with record inflation driving up the cost of doing business while also making customers think twice about their spending habits.  The result has been something of a mixed bag: Small business owners nearly doubled their revenues between Jul 2021 & Jul 2022, according to a new report from Kabbage, the small business lender owned by American Express (AXP).  However, while revenues grew by 87% over that time, small businesses' profits were almost stagnant during that period, actually dropping by 4%.  The reason: Higher cost of goods & a competitive labor market that favors workers have forced small businesses to increase spending to remain competitive, eating into any profits they might have enjoyed from the large overall jump in revenue.  75% of the 550 small business owners & operators that Kabbage surveyed said inflationary pressure had affected their bottom line over the past year.  And 56% of respondents expect to continue feeling the crunch from inflation through at least the summer of 2023.  The US economy has seen record-high inflation, with the consumer price index up 8.3% over the past year.  That inflationary pressure means higher costs for small business owners who then have to make the difficult decision of how much of those costs they can afford to pass on to their customers without risking losing business.  The Federal Reserve tried to tamp down inflation Wed with an interest rate hike announcement, but the central bank still does not expect inflation to fall to its 2% goal until 2025.  The survey found that raising prices is the most popular remedy for business owners, with 37% saying that was their plan.  Another 22% of respondents said they plan to negotiate better deals with suppliers in order to lower costs.  While inflation is the economic factor on most business-owners' minds these days, many of them are also preparing for the possibility that the US economy could fall into another recession.  Experts have pointed to rising inflation as a potential indicator that a recession could be looming, but economists have mostly been split of late on the issue, though some argue the economy is already in another downturn.

Inflation is eating up small business owners’ profits, says new survey

Moderna (MRNA) has asked the Food & Drug Administration (FDA) to authorize its omicron booster shots for children.  Moderna filed 2 separate FDA authorization requests, one for adolescents ages 12-17 & another for kids ages 6-11.  The biotech company said it will also ask the FDA to clear the shots for the youngest children, 6 months thru 5-years-old, later this year.  The Centers for Disease Control & Prevention (CDC) said it expects children to become eligible for the omicron boosters by mid-Oct pending authorization by the FDA.  The CDC's vaccine advisory committee has meetings scheduled for Oct 19-20.  US health regulators cleared MRNA's omicron boosters for adults earlier this month.  The new shots target the omicron BA.5 subvariant as well as the original strain of Covid that first emerged in China in late 2019.  The FDA & CDC expect the new boosters to provide superior protection against infection & disease because they target the most common omicron subvariant.  The stock fell 68¢.
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Moderna asks FDA to authorize omicron Covid boosters for children as young as 6 years old

Gold futures settled at their lowest price since Apr 2020, under pressure as the $ soared versus major rivals & short-term bond yields jumped amid fears aggressive monetary tightening by central banks could spark a global recession.  Gold for Dec fell $25 (1.5%) to settle at $1655 an ounce, the lowest for a most-active contract since early Apr 2020.  For the week, prices ended 1.7% lower.  Gold failed to benefit today from its status as a haven during periods of geopolitical & economic uncertainty.  The pressure on gold is coming under in the current macroeconomic environment, with interest rates going up across the world & likely to continue doing so for a number of months yet, means it is hard to see how the metal can make gains with the question more about how low it will go.  The $ continued ita march higher with the ICE US Dollar Index at its highest in more than 20 years.  A rising $ makes commodities prices in unit more expensive to users of other currencies.  The main supportive factor for gold remains the war in Ukraine, after Russian Pres Vladimir Putin this week moved to escalate the conflict & hinted at the potential use of nuclear weapons 

Gold futures settle at lowest in more than 2 years as dollar, yields soar

Oil futures declined with US prices dropping below $80 a barrel to settle at their lowest since Jan.  Economic turmoil is putting oil on track for its first quarterly loss in 2 years as the market focuses on the potential coming recession inspired by aggressive Federal Reserve policy & is not focused currently on the undersupplied supply squeeze that is facing the world this winter.  Nov WTI crude fell $4.75 (5.7%) to settle at $78.74 barrel. 

U.S. oil futures drop below $80 barrel to settle at lowest since January

There was a little bargain hunting into the close, but not enough to make big difference.  The Dow finished down 1230 this week & closed below the important 30K support level.  The outlook continues to be gloomy as the effects if higher interest rates are just beginning to be felt by so many people.  

Dow Jones Industrials