The market was closed on Monday for Martin Luther King Jr. Day.
“The culprit this morning, as it seems to be every day, is interest rates as the yield on the 10-year tops 1.8% and the 2-year yield moved back over 1%,” Paul Hickey of Bespoke Investment Group said in an email to clients.
Both those bonds’ yields haven’t been at similar levels since before the pandemic: For the 10-year it was January 2020 when it last yielded over 1.8%, and the 2-year hasn’t touched more than 1% since February 2020, according to Refinitiv.
“Wall Street has been under pressures too thanks to Fed tightening worries, the jump in rates and worries over slowing growth,” analysts at Action Economics said in their morning note.
The Federal Reserve is rolling back its pandemic stimulus program and expects multiple interest rate hikes this year to rein in rampant inflation.
Then there’s earnings season.
“As last week’s earnings reports revealed, the bottom line and guidance have been adversely impacted by rising expenses,” the Action Economics analysts said. Inflation worries are everywhere.
Both banks’ shares traded lower Tuesday, with JP Morgan down more than 4% and Goldman Sachs dropping more than 8%.
“Manufacturing activity was little changed in New York State according to the January survey, suggesting that growth stalled after a period of significant expansion,” the NY Fed said.
But is there reason to worry about the state of the stock market?
“The equity market weakness experienced thus far in 2022 is not unusual,” said Sam Stovall, chief investment strategist at CFRA Research.
In fact, history shows that stocks tend to sell off and correct after a 20+% gain in the preceding calendar year, Stovall said. And if the selloff doesn’t occur right away, it happens later on in the year.
“The implication for 2022 is that the current decline has further to fall,” he added.