Day Traders Diary

6/22/22

The major averages closed modestly lower as the markets struggled to sustain a rebound from earlier in the day. Traders also weighed comments from Federal Reserve Chair Jerome Powell, who reiterated the central bank's stance to fight inflation. The broader market index, S&P 500  dipped 4 points to 3759. The Dow Jones Industrial Average dropped 48 points, or 0.2% while the Nasdaq Composite fell 16 points.

Those moves followed growing concerns of a recession that have recently weighed on stocks. Last week, the central bank raised rates by 0.75 percentage point and hinted another increase of that magnitude was possible next month.

Fed Chair Powell on Wednesday played down recession concerns and told Congress the central bank has the "resolve" to tame inflation that has surged to 40-year highs.

"At the Fed, we understand the hardship high inflation is causing," the Fed chief said to the Senate Banking Committee. "We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so."

Powell added that the Fed will stay the course until it sees "compelling evidence that inflation is moving down." He also said achieving a soft landing for the economy without a recession has become "significantly more challenging."

The Federal Reserve's shift last week to a more aggressive inflation-fighting stance unnerved investors who worried the central bank would rather risk a recession than endure persistent high inflation.

Oil and bond yields fell on Wednesday, relieving some of the pressure they've given stocks lately. Brent crude futures dropped 2% to $112.41 per barrel. West Texas Intermediate, the U.S. oil benchmark, declined 2.2% to $107.02 per barrel.

The benchmark 10-year note yield fell to below 3.2%. Yields move inversely to prices.

A peek into the S&P 500 showed that the real estate and health care sectors drove outperformance in the broader market index, with the two sectors each up 2%. Shares of Crown Castle and American Tower jumped 5% and 4%, respectively. Shares of Moderna surged 7%.

Consumer discretionary stocks such as homebuilders Lennar and D.R. Horton each jumped 3%.

Meanwhile, expectations of a pending recession continued to grow on Wall Street this week. Citigroup raised chances of a global recession to 50%, pointing to data that consumers are starting to pull back on spending.

Goldman Sachs believes a recession is becoming increasingly likely for the U.S. economy, saying that the risks are "higher and more front-loaded."

Meanwhile, UBS said Tuesday in a note to clients that it does not expect a U.S. or global recession in 2022 or 2023 in its base case, "but it's clear that the risks of a hard landing are rising."

Elsewhere, energy stocks took a hit as oil prices dropped on concern a slower economy will hurt fuel demand. The sector was the worst-performing on the broad market index, last down 2.5%.

Shares of Marathon Oil and ConocoPhillips dropped more than 5% and 4%. Occidental Petroleum and Exxon Mobil dipped 2%.

On Wednesday, President Joe Biden called for Congress to suspend the federal gas tax. The effort is meant to ease pressures at the pump for consumers during an election year.