Volatility has risen for stock markets in the last week or so. After euphoria gripped primarily the technology sector during the earnings season, economic data is troubling. The U.S. job market is stronger than the Fed would like, inflation is over 3% annualized, and producer prices are high.
On Thursday, closing losses would have been worse had buyers not stepped in after 3:30 p.m. The bad news is that the 20+ year Treasury Bond (TLT) lost 3% in the last week. It peaked at over $100 in late Dec. 2023 when markets expected an unimaginable six interest rate cuts this year. TLT stock closed at $92.97.
Risks are rising for a stock downtrend formation. The small-cap Russell 2000 (IWM) lost around 2% as expectations for a Fed rate cut in June diminished.
The retail sector is under pressure after retail sales increased by 0.6%. This increase is barely keeping up with inflation, suggesting that buying volumes are falling.
In the commodity sector, WTI crude futures spiked higher above $80. The good news is that the Fed looks at inflation by stripping out energy and food prices. This would hide this inflationary pressure in the report. Still, people know better. They already cut back spending on big items like appliances. Whirlpool (WHR) is down by 13% YTD. Automotive firm Ford (F) is 20% below its 52-week high, while Tesla (TSLA) is 45.70% lower.
EV firms that failed to mass-produce vehicles during the boom years of 2020-22 face bankruptcy risks. That includes Lucid Motors (LCID) and Fisker (FSR).
