Stock Market News

“As long as rates go higher and the dollar gets stronger, the stock market goes down,” said Tavis McCourt, institutional equity strategist at Raymond James.

Negative sentiment on Apple (AAPL) wasn’t helping. Bank of America downgraded the stock, predicting that analysts in general are likely to reduce their profit forecasts for the tech giant. iPhone demand had already been in question, given waning consumer spending. Apple stock fell 4.9%.

That didn’t help the broader market. Not only is consumer spending a concern, but Apple’s unusually large market capitalization is helping drag the S&P 500 and Nasdaq – the levels of which are weighted by market cap – lower.

On Wednesday, all three major indexes jumped more than 1%, with the S&P 500 up 2% as bond yields around the globe finally dipped. That was because the Bank of England said it would start buying long-dated government bonds, which increases bond prices and lowers their yields. The move could counteract higher yields resulting from a fiscal stimulus plan that could spark more inflation and global central banks’ interest rate-hiking campaigns. Rate hikes are meant to reduce inflation by curbing economic demand.

Now, yields are trying to trudge higher once again.

That is partly because the market is aware that the Bank of England’s bond-buying program, or “quantitative easing," isn’t supposed to last too long. The forces of inflation and rate hikes across the globe remain in place.

“The markets know temporary QE is just that, temporary,” wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group.

The U.K.’s 10-year gilt yield rose to 4.142%, though it is still below the almost 4.6% level it hit a few days ago. The U.S. 10-year Treasury yield rose to 3.75% on Thursday and earlier in the week, the yield hit a multi-year high of 3.9%.

With U.S. bond yields rising and jitters about global economic demand, global investors have generally been buying dollars, too. The U.S. Dollar Index (DXY) dipped a touch Thursday but is up in the mid-teens in percentage terms this year to just over 112. It is also just below its multi-decade high hit a few days ago.

A stronger dollar is a concern for the stock market. U.S. multinational companies that generate sales overseas see lowered earnings when they translate those sales back into a stronger greenback.

For the rest of the globe, a stronger buck makes purchasing anything in dollars more expensive. A stronger dollar also makes U.S. exports less attractive because they become more expensive to buy. Historically, on average, every 10% increase in the dollar lowers U.S. real gross domestic product growth by 0.4 of a percentage point, according to Morgan Stanley economists. That is not insignificant, considering economists are forecasting real GDP growth in the low single digits in percentage terms for the next few years, according to FactSet.

So yields and the dollar are moving back toward their highs. Stocks, however, are more fearful of yields and the dollar going higher still – and causing economic damage.

Now, the market outlook is worsening. A lack of buyers at the S&P 500’s previous low point shows weakening confidence in the market’s direction going forward. Evercore’s head of technical analysis, Rich Ross, wrote “Panic has set in,” and that if the S&P 500 falls from here, he is likely to revise his forecast for the index lower.

That the stock market is trading so poorly when yields and the dollar aren’t even touching their highs might seem a bit perplexing. And blaming window dressing, or portfolio managers selling stocks to show their clients at quarter-end that they aren’t too exposed to a down-trending market, might seem easy. But equity fund managers have already sold a lot of stock this year – and raised a lot of cash.

“Institutions have been so out of this market for so long that it’s hard to believe that there is a lot of window dressing that would cause downside,” McCourt said.

Overall, "for a more sustained rally, investors will need to see convincing evidence that inflation is coming under control, allowing central banks to become less hawkish,” wrote Mark Haefele, chief investment officer of global wealth management at UBS.

Bonds and currencies aside, it is not surprising that the stock market is giving back its Wednesday gains. In this year's 16 instances of 2% gains on the S&P 500 before Wednesday, the next day featured a loss the majority of the time, according to Cappthesis.com.

Elsewhere, weekly jobless claims declined to 193,000, better than expectations for 215,000 claims.

Rite Aid (ticker: RAD) tumbled 28% after the retail drugstore chain posted a wider- than-expected loss for its second quarter. The company also lowered its outlook for full-year Ebitda, or earnings before interest, taxes, depreciation, and amortization.

CarMax (KMX) sank 25% after the used-car dealer reported earnings for the second quarter that came in well below analysts’ expectations.

Peloton Interactive (PTON) announced that it will begin selling some of its hardware products and accessories at Dick’s Sporting Goods (DKS) in an effort to expand growth. Shares of Peloton fell 14%.

Duckhorn Portfolio (NAPA) dived 6.6% after the luxury wine company said it will be raising prices of certain products to offset the effects of inflation. A J.P. Morgan analyst wrote in a research note that she sees a "potential risk of deceleration in the luxury wine segment from consumer softness."

Coinbase Global (COIN) dropped 8% after an analyst from Wells Fargo initiated coverage of the stock with an Underweight rating and said the company has an “unclear path to sustainable profitability.”

Piper Sandler analyst Alexander Potter lowered his price target on Tesla (TSLA) stock to $340 from $360 a share ahead of the company’s third-quarter delivery report. Tesla shares fell 6.8%.

Bed Bath & Beyond (BBBY) shares dropped 4.2%. The struggling home goods retailer posted second-quarter results that missed expectations.

Apple (AAPL) fell 4.9%. The stock slumped Wednesday on a report that said Apple had reversed plans to boost iPhone 14 production later this year after an expected surge in demand failed to materialize. The iPhone maker was the only stock in the Dow Jones Industrial Average to finish lower on Wednesday. That hasn’t happened since Dec. 22, 2015, the same year Apple was added to the blue chip index.

On Thursday, Apple stock was downgraded to Neutral from Buy at BofA Global Research.

DXC Technology (DXC) rose 2.5% on a report that the takeover price being discussed for the company is around $45 a share. The stock currently trades at around $25.

Amazon.com (AMZN) shares fell 2.7% after the e-commerce giant said that it was raising its hourly pay for warehouse and transportation employees. This increase in pay will cost nearly $1 billion.