U.S. Stocks Move Mostly Lower After Early Volatility

After showing a lack of direction earlier in the session, stocks have moved mostly lower over the course of the trading day on Monday. The major averages are adding to the steep losses posted last week, with the Dow falling to its lowest intraday level in almost two years.

Currently, the major averages are just off their worst levels of the day. The Dow is down 358.90 points or 1.2 percent at 29,231.51, the Nasdaq is down 58.25 points or 0.5 percent at 10,809.68 and the S&P 500 is down 40.66 points or 1.1 percent at 3,652.57.

A continued surge in the value of the U.S. dollar has contributed to the weakness on Wall Street, with the greenback hitting a record high versus the British pound.

Aggressive interest rate hikes by the Federal Reserve continue to contribute to the increase by the dollar along with Britain’s new chancellor Kwasi Kwarteng’s announcement of a sweeping package of tax cuts.

“Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” said Morgan Stanley chief U.S. equity strategist Michael Wilson. “If there was ever a time to be on the lookout for something to break, this would be it.”

Concerns about the outlook for the global economy also continue to weigh on the markets amid worries the increases in interest rates around the world will lead to a recession.

The Fed and other central banks have indicated they plan to continue raising rates in an effort to combat stubbornly elevated inflation.

In the coming days, traders are likely to keep an eye on reports on durable goods orders, consumer confidence, new home sales and personal income and spending.

The extended weakness on Wall Street also comes amid a spike in treasury yields, with the yield on the benchmark ten-year note soaring to a twelve-year high.

Sector News

Interest rate-sensitive commercial real estate and utilities stocks continue to turn in some of the market’s worst performances, with the Dow Jones U.S. Real Estate Index and the Dow Jones Utility Average plunging by 3.6 percent and 3.3 percent, respectively.

Substantial weakness also remains visible among airline stocks, as reflected by the 3.5 percent nosedive by the NYSE Arca Airline Index. The index has plummeted to its lowest intraday level in over two years.

Gold stocks also seeing significant weakness amid a steep drop by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 3 percent.

Natural gas, housing, telecom and computer hardware stocks have also moved notably lower amid broad based weakness on Wall Street

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan’s Nikkei 225 Index plunged by 2.7 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.

Most European stocks also moved to the downside on the day. While the U.K.’s FTSE 100 Index ended the day little changed, the French CAC 40 Index dipped by 0.2 percent and the German DAX Index fell by 0.5 percent.

In the bond market, treasuries have pulled back sharply after ending last Friday’s trading slightly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 20.5 basis points at 3.902 percent.

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