Jakarta, CNBC Indonesia – Futures contract (futures) the United States (US) stock index corrected in trading Monday (13/6/2022), where the S&P 500 index is on track to fall back into territory bear market (declining zone) and possibly to a new low of the year.
The spike in yields (yield) Short-term bonds increased the negative sentiment as investors still reeled from the rising inflation report and prepared for the important meeting of the US central bank (Federal Reserve / The Fed) later this week.
On Friday (10/6), the S&P 500 index fell 2.3%, 19% from its record high and about 2.4% above last month’s low. Overall the S&P 500 index is at bear market and is 20% of its record high.
Contract futures The Dow Jones index fell 573 points, or 1.8%. The same thing happened to the Nasdaq and S&P 500 indexes, which fell by 2.9% and 2.06%, respectively.
Todayyield The 2-year bond rose 15 basis points to 3.2% and hit a record high since 2007 as investors bet that the Fed will be more aggressive in controlling inflation. In today’s trading, the 2-year tenor briefly traded above the 10-year tenor for the first time since April or the so-called yield inversion which is seen as an indicator of recession.
The majority of the major indexes last week posted their biggest weekly declines since late January. The Dow Jones and S&P 500 indexes fell 4.6% and 5.1%, respectively. Meanwhile, the Nasdaq lost 5.6%.
Part of the loss occurred on Friday (10/6), when US inflation data exceeded expectations to scare investors. The Dow Jones index fell 880 points, or 2.7%. Meanwhile, the S&P 500 and Nasdaq lost 2.9% and 3.5%, respectively.
The Bureau of Labor Statistics reported that the US Consumer Price Index (CPI) as of May stood at 8.6% YoY, the fastest increase since December 1981. The core CPI excluding food and energy prices was also above forecasts of 6%.
In addition, the release of the University of Michigan’s consumer sentiment index was recorded at a record low of 50.2.
Fuel prices soared $5/gallon last week, fanning fears over rising inflation and falling consumer confidence.
Bitcoin fell below $24,000 on the day after ending above $29,000 on Friday (10/6) as investors shun risk assets and dump the crypto amid rising interest rates.
The Fed is expected to announce at least a half-point rate hike on Wednesday local time. For information, the Fed has raised interest rates twice this year, including a 50 basis point hike in May. Some analysts predict that the Fed could even raise interest rates by up to 0.75% this week.
“Investor and consumer sentiment are both deteriorating. But this time, the widespread decline may not serve as a signal bullish contrarian as in the past. The chance increases to 45% against a mild recession which is up from the previous estimate of only 40%,” said Yardeni Research Chair Ed Yardeni quoted from CNBC International.
Stocks had a tough year as recession fears escalated along with the CPI, with the Dow Jones down 13.6% so far this year.
Nasdaq signed in to bear market and is down 27.5% so far this year and is trading 30% below its record high in November.
CNBC INDONESIA RESEARCH TEAM
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