17 May 2022

Wall Street suffers another uncertain session; S&P 500 and Nasdaq fall as Dow ticks higher

Investors continued to express uncertainty during Monday's trading, with the broader averages bouncing around in yet another volatile session. Selling in the final hour of trading left Wall Street mixed at the close.

Stocks showed weakness early in the day amid ongoing worries about global growth. However, boosted by strength in defensive sectors, the major averages staged an advance during the middle of the day.

However, this gave way late in the session, with the S&P 500 and the Nasdaq closing solidly in the red. The Dow finished just above the flat line but well off its highs of the session.

For the S&P, this marked the sixth lower finish out of the last eight session. However, the index stayed off of the 52-week low reached last week and closed just above the 4,000 mark.

The Dow (DJI) finished +0.1%, outperforming the other major averages, thanks to price gains in Merck and Chevron. The S&P (SP500) ended -0.4% and the Nasdaq (COMP.IND) closed -1.2%.

The Dow Jones eked out a gain of 26.76, ending the session at 32,223.42. The S&P 500 slipped 15.88 to close at 4,008.01. The Nasdaq concluded trading at 11,662.79, a decline of 142.21 points on the session.

Seven of 11 S&P sectors finished lower. Consumer Discretionary led the retreat, falling by more than 2%. Energy represented the biggest advancer, climbing by 2.6%.

Turning to the bond market, the 10-year Treasury yield slipped 5 basis points to 2.88%. Meanwhile, the 2-year year edged down one basis point to 2.59%.

In economic news, the May Empire State Manufacturing Index showed a huge drop to -11.6. This raised concerns about the manufacturing sector, as well as the prospects for economic growth in general.

"The Empire State index has been even more erratic than usual in recent months but the unexpected leap in April never looked sustainable; the only question was the size of the correction," Pantheon Macro said. "In the event this steep drop reversed the entire March increase, so the index is back to its post-Covid low."

The firm added: "The drop in the headline is mirrored in some of the components, with orders and shipments down sharply, but employment and the workweek rose modestly."

China's zero-COVID policy hit economic activity in April hard. That raised concerns about further supply disruptions in the coming months.

Meanwhile, Goldman Sachs cut its outlook for U.S. 2022 GDP to 2.4% from 2.6%. While Goldman's baseline is still for no recession in 2022, if one appears it sees the S&P dropping to 3,600. Morgan Stanley says a bear market rally is already underway, but then the slide will continue to S&P 3,400.

Among active stocks, Twitter was among the biggest S&P decliners as speculation that a deal to be purchased by billionaire Elon Musk may not happen. Musk continued to speak about the subject on Monday.

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