The market is closed on Monday for Martin Luther King Jr Day.
“The culprit this morning, as it seems every day, is interest rates, with the top 10 year yield being 1.8% and the two year yield coming back over 1%,” said Paul Hickey of Bespoke Investment Group. Email clients.
Yields for these two bonds have not been at similar levels since before the pandemic: For the 10 years, January 2020 was when it last yielded more than 1.8%, and the two years haven’t touched more than 1% since February 2020 according to Refinitiv.
“Wall Street has also been under pressure thanks to heightened Fed concerns, jumps in rates and concerns about slowing growth,” Action Economics analysts said in their morning note.
The Federal Reserve is backing off its pandemic stimulus program and expects to raise interest rates several times this year to rein in rampant inflation.
Then there is earnings season.
“As earnings reports revealed last week, the bottom line and guidance were negatively impacted by higher expenses,” Action Economics analysts said. Inflation fears are everywhere.
Shares of both banks traded lower on Tuesday, with JP Morgan down more than 4% and Goldman Sachs down nearly 7%.
“Manufacturing activity changed little in New York state according to the January survey, indicating that growth has stalled after a period of significant expansion,” the New York Fed said.
But is there reason to be concerned about the state of the stock market?
“The stock market weakness we have seen so far in 2022 is not unusual,” said Sam Stovall, senior investment analyst at CFRA Research.
In fact, history shows that stocks tend to sell and correct after a 20+% increase in the previous calendar year, Stovall said. And if the sale doesn’t happen right away, it will happen later in the year.
He added, “The implication for 2022 is that the current downturn should go down further.”