Recession Fears Grip Wall Street in Volatile Week

The S&P 500 and Nasdaq both officially entered bear market territory this week

Digital Content Manager
Jun 17, 2022 at 12:10 PM
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Economic recession fears overwhelmed Wall Street this week, a theme that's been all too prevalent in 2022. The S&P 500 Index (SPX) closed in bear market territory on Monday, while both the Dow Jones Industrial Average (DJI) and Nasdaq Composite (IXIC) logged their lowest closes since February and March 2021, respectively. This followed a Wall Street Journal report that the Federal Reserve was "likely to consider" a 75 basis-point interest rate hike. What's more, the 2-year Treasury yield briefly crossed the 10-year rate, forming a yield curve inversion that is indicative of a recession. More losses came on Tuesday, though the Nasdaq was able to settle slightly above breakeven despite logging a 19-month low.

Stocks bounced back on Wednesday, after the Fed officially hiked interest rates by 75 basis points -- the sharpest rise since 1994. Fed Chair Jerome Powell noted a similar hike may happen in July, reinforcing the central bank's dedication to containing inflation. Lackluster economic data helped push the Dow below 30,000 level for the first time in more than a year on Thursday, while the Nasdaq joined the S&P 500 in official bear market territory. Stocks were eyeing another rebound on quadruple witching Friday, but were also on track for their third-straight week of steep losses. 

Volatile Week for Tech Stocks

All this volatility made for an interesting week in the tech sector. Tesla (TSLA) was not spared from the broader market headwinds, despite a fresh analyst upgrade. Neither was (AMZN), which stood out as the worst-performing FAANG name at one point on Monday. While Alibaba (BABA) plummeted alongside its sector peers, the Chinese tech stock remained popular among options traders. Plus, a handful of stocks bucked the tech selloff. Specifically, Oracle (ORCL) bounced back on cloud demand, and an upgrade lifted Snowflake (SNOW) out of all-time lows. Zendesk (ZEN) also managed to distance itself from two-year lows, after settlement talks with activist investor Jana Partners.

Retail Movers and Shakers

Inflation jitters had investors carefully monitoring retail stocks. Options traders blasted RedBox Entertainment (RDBX) as the short interest candidate extended its rally and trended on StockTwits. Coty (COTY) also edged higher after reaffirming both its current-quarter and full-year profit and sales guidance, while Best Buy (BBY) sank following a downgrade. Meanwhile, Kroger (KR) issued a beat-and-raise for its latest quarter, and Morgan Stanley turned bullish on Dollar General (DG).

Gold and Oil Stocks to Watch

Investors are taking special interest in commodity-related stocks of late. Gold concern Newmont (NEM) presents a solid opportunity for options bulls right now, and oil name Chevron (CVX) looks like it could soon reclaim former highs. Similarly, Marathon Oil (MRO) could sprint after pulling back to this historically bullish trendline, while blue chip Dow (DOW) also looks like the perfect recovery play. Elsewhere, Continental Resources (CLR) hit multi-year highs on a $25.41 billion buyout offer.

Quiet Holiday Week Ahead

Next week will be a fairly quiet one, with markets closed on Monday in observance of Juneteenth. In terms of key economic data, investors will be eyeing jobs data, and both the S&P Global U.S. manufacturing and services purchasing managers indexes (PMIs). The earnings docket will feature CarMax (KMX)Carnival (CCL), Darden Restaurants (DRI)FedEx (FDX), KB Home (KBH), La-Z-Boy (LZB), Lennar (LEN)Rite Aid (RAD), Smith & Wesson Brands (SWBI), as well as Winnebago (WGO). To better navigate this volatile market, learn how to manage risk after last week's selloff, and see what could lie ahead for the SPX after this rare losing streak.

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