After a short pause, the U.S. stock market decided not to rest on its laurels and decided to continue falling while updating its record highs.
By the end of Thursday trading session the Dow Jones and S&P 500 were down 0.82% – 0.88%, showing the worst quarterly results since the first three-month cycle in 2020. At the same time, the broad market index recorded its most negative first half-year since 1970, having already lost more than 20% in the six months of this year. The Nasdaq Composite was 1.33% lower on Thursday, and the benchmark tech stocks collapsed 20% for the quarter, the most negative total since the 2008 mortgage crisis. Meanwhile, second-quarter losses exceeded 30%.
The New York Stock Exchange building. Photo: The Street
Recently, corporate updates on economic forecasts and financial results for the near future have become more frequent, after the publication of which the shares of companies decline decently. Recently this factor caused the collapse of Nike (NKE) shares, and on Thursday the pharmacists of Walgreens Boots Alliance (WBA) opened their plans for the future, after which the securities became the leader of falling with 7.27% in three main stock indices at once.
Oil unexpectedly weakened
in view of OPEC+ conference WTI West Texas Intermediate (WTI) futures contracts fell sharply by 3.6% to $106 per barrel, while Brent North Sea crashed to $109, losing 6%. There was no news to suggest such a sell-off in the news, though. Moreover, the producers have agreed to stick to their previously announced plan to gradually increase output, with no hint of an increase in production. And all this happens against the background of the suspension of Libyan oil exports from key ports, as well as a decline in production in Ecuador due to ongoing protests, CNBC reasonably remarks.
Chevron failed to support the Dow Jones
Shares of ExxonMobil (XOM) became cheaper by 2.8%. Chevron (CVX) and ConocoPhillips (COP) were down 1.5%, and 1.8%, respectively. OXY remained the best performing stock in the sector, trading nearly neutral at -0.37%. Despite significant losses in June, the energy sector remains the industry favorite for 2022, and currently holds an impressive 30% gain. And the aforementioned Occidental Petroleum is adding a fantastic 89% since the beginning of the year.
Uniper revises results
A similar situation prevailed on the stock exchanges in Europe and the markets were driven by the gloomy sentiment regarding the aggressiveness of central banks against the background of the fight against record inflation. German energy giant Uniper withdrew its previous financial outlook today due to supply constraints from Russia. The company said it has been short about 40 percent of its contracted natural gas supply in the last two weeks and its financial data for the first half of the year will be much lower than previously expected.
As for Gazprom, the shares of the Russian gas giant plummeted by 30% today against the background of the shareholders’ meeting decision not to pay out record dividends for 2021. Recall that back in May it was planned to allocate more than 1.24 trillion rubles for that purpose, and the payment per share would be 52 rubles. The main shareholders explained the change of position by a shift in priorities towards the development of the investment program and preparations for large tax payments.
And speaking of Gazprom, let’s not forget to add that the market situation is extremely favorable for the Russian company. The prices of natural gas in Europe, already high, continue to rise. In the past couple of weeks alone the cost of one thousand cubic meters of natural gas reached $ 1500, and yesterday it even exceeded this level. Taking into account the current low season for such price movements we may assume that closer to the heating season in Europe the gas prices will be growing towards their maximum values even more actively, which means that everything will be fine with Gazprom.
The half-year remained record weak
As we have already seen, the quarter-end rally did not materialize. The aggressiveness of the central banks fighting the inflation around the world remains the priority of the investors’ decisions. Hence the disappointing results of the stock market. Until the Fed at least verbally talks about easing its policy, or some factors that can somehow precede it, any positive movement at the stock market is out of the question.
Only oil, natural gas and selectively agricultural products are good investments this year. Everyone else has to wait for Jerome Powell’s rhetoric to change. For how long? No one knows. But since we’re bringing the 1970 analogy to the headline, let’s continue with it. When the S&P 500 was down 21% in the first six months of 52 years ago, the second half of the year saw a 27% recovery. One can certainly hope, but not necessarily.