Stock market selling is acclerating Monday as rates surge and further Fed tightening is priced in.
The VIX ia jumping, above 34.
The S&P has fallen through 3,800, a level it must hold to avoid a swift drop to 3,400, BTIG says.
“The decline in the Nasdaq 100 from its peak last November (-31.7%) is larger than its decline during the 2020 crash (-30.4%),” Charlie Bilello, CEO of Compound Capital Advisers, tweeted.
All 11 S&P sectors are lower, with Energy the weakest, off more than 6%. Amazon and Tesla are faring the worst among the megacaps. Consumer Staples is seeing the least amount of damage.
U.S. Treasury yields have taken off with the 10-year yield rising 15 basis points to 3.31% and the 2-year yield gaining 18 basis points to 3.23%. The 10-year now sits at its highest level since April of 2011, whereas the 2-year topped highs it has not experienced since December of 2007. The 2s10s curve inverted briefly overnight.
Odds are increasing of 75-basis point rate hike from the FOMC on Wednesday, currently about 35% on the CME.
“We expect a 50bps hike at the 15 June FOMC, but do not preclude a hike of 75bps or even 100bps,” Standard Chartered’s Steve Englander said. ” We now see a 50bps hike in July (prior 25bps), 50bps in September (flat) and shift our December 25bps hike to November.”
“There are signs of an impending major slowdown in activity, but not enough so far to deter the FOMC. A message of 50bps hikes for the next ‘couple’ or ‘few’ meetings would be dovish given market pricing. A hawkish signal would be a 75bps hike or a strong ‘do what it takes’ warning.”
Deutsche Bank came out as the first major bank to call for a terminal rate of more than 4% in 2023.
Shifting to the world of crypto and investors will notice that cryptocurrency’s market capitalization has dropped below $1T on Monday, for the first time since January 2021.
“I’ve become more pessimistic about the opportunity of stabilizing inflation at an acceptable level without a recession,” said JPMorgan Chase chief economist Bruce Kasman.
Moreover, an increasing number of economists are now doubting the possibility of a “soft landing,” which would see the Fed get inflation under control without triggering an economic downturn.
Among active stocks, Alphabet traded lower by 4% as the tech giant has agreed to pay $118M to settle a class-action lawsuit that charged the firm with discriminating against female employees with regards to job promotions and pay raises.
Casinos and cruise lines are among the weakest S&P performers, while Duke Realty is the top gainer on its merger offer.