The stock market displayed a mixed performance today, with index levels being supported by strong mega-cap stocks amid concerns about global growth. Apple, Amazon.com, and Alphabet were among the top performers in the mega-cap space. The Vanguard Mega Cap Growth ETF also saw a rise. However, the broader market showed weakness due to ongoing consolidation efforts and the aforementioned growth concerns.
The major indices, including the S&P 500 and Nasdaq, closed near their best levels of the session, while the Dow Jones Industrial Average ended the day relatively flat. Market breadth indicated negative action beneath the surface, with decliners outnumbering advancers. The underlying weakness in the market was influenced by rate hikes implemented by several central banks, including the Bank of England, Norges Bank, Swiss National Bank, and Central Bank of Turkey. These rate hikes raised concerns about global inflation and the potential impact on global growth.
Federal Reserve Governor Michelle Bowman stated that additional policy rate increases would be necessary to address inflation, echoing comments made by Fed Chair Powell regarding the possibility of two more rate hikes by the end of the year. However, the morning’s economic data was mostly weaker than expected, with declines in existing home sales and the Leading Economic Index.
During his testimony before the Senate Banking Committee, Fed Chair Powell did not provide any surprises regarding monetary policy views. However, concerns were raised by committee members regarding capital requirements for banks, further impacting bank stocks. Weak regional bank components and energy shares contributed to the underperformance of the Russell 2000.
Most sectors of the S&P 500 registered losses, with real estate and energy seeing the largest declines. However, consumer discretionary, communication services, and information technology sectors benefited from the strong performance of mega-cap stocks.
In response to the rate hikes, Treasury yields experienced losses across the curve. The 2-year note yield rose by nine basis points, while the 10-year note yield rose by eight basis points.
Looking ahead, economic data for Friday is limited, with the preliminary IHS Markit Manufacturing PMI and Services PMI for June being released.
Overall, the mixed performance in the stock market was influenced by concerns about global growth and the impact of rate hikes by various central banks. While mega-cap stocks provided support, weakness in other sectors and negative market breadth highlighted the underlying challenges faced by the market. Investors will continue to monitor economic data and central bank actions to gauge the trajectory of the market in the coming days.
