Stocks kicked-off the second half of the trading year in much the same way they exited the first: focused in the impact inflation will have on growth prospects for the world's biggest economy.
The S&P 500, the broadest measure of U.S. stocks, ended the first half with a 20.58% decline, entrenching the benchmark in bear market territory and capping the worst January to June slump since 1970.
The contextual declines for the Dow and the Nasdaq were even worse, with the tech-focused benchmark suffering its biggest half-year decline on record while the Dow fell the most, in percentage terms, since 1962.
Yesterday's reading of the Federal Reserve's preferred inflation gauge largely encapsulated investor concerns, with the PCE Price index data showing a modest decline in core inflation pressures, which remain uncomfortably close to multi-decade highs, and waning consumer spending.
The Atlanta Fed's GDPNow forecasting tool, a real-time tracker of growth prospects, now suggests the economy shrank 1% over the second quarter, following-on from a 1.6% contraction over the first three months of the year and indicating a technical recession in the world's biggest economy.
"A sustained improvement in market sentiment looks unlikely until investors see convincing evidence that inflation has peaked," said Greg Marcus, managing director, UBS Private Wealth Management in Washington, D.C. "There continues to be a high degree of uncertainty as investors continue to weigh the economic picture and try to decide if we are headed for stagflation, reflation, a soft-landing, or a prolonged slump."
"During the second half of 2022, volatility is likely to remain elevated until we see convincing evidence that inflation is moderating, recession risks are receding, and geopolitical threats are declining," he added.
Micron Technology's (MU) grim near-term outlook last night underscored the breadth of the weakness as the chipmaker cautioned on waning PC and smartphone demand linked in part to China's 'zero Covid' lockdown that crippled its May quarter.
Micron shares fell nearly 3% to $51.65 each, extending the stock's year-to-date decline to around 46%.
Overnight data from China offered at least some relief that its post-covid recovery could ignite global growth prospects, as a private reading of manufacturing activity showed the first expansion in four months and the fastest rate in more than a year.
Europe's prospects, however, dimmed slightly as a key output reading in its factory activity PMI data fell below the 50 mark which separates growth from contraction for the first time in two years last month.
The region's Stoxx 600 benchmark was marked 0.05% lower in late-day Frankfurt trading, following a 1.01% decline for the MSCI ex-Japan index in Asia, while benchmark 10-year note yields tumbled to 2.884% in early New York trading and the dollar index gained 0.67% to trad at 105.223 in safe-haven trading against its global peers.
On Wall Street, the S&P 500 closed up 1.1%, while the Dow Jones Industrial Average jumped 322 points, or 1.05%, to 31,097. The tech-focused Nasdaq gained 0.98%.
In terms of individual stocks, Tesla (TSLA) shares, fresh off their worst quarterly decline on record, finished up 1.24%, while investors brace for what could be a grim reading on global deliveries in the coming days.
Kohl's Corp. (KSS) shares tumbled 19.4% after the struggling retailer ended talks with the Franchise Group (FRG) over a possible $8 billion takeover.
General Motors (GM) rose 1.4% after it cautioned that chip shortages and supply chain disruptions lead to production delays that impacted around 100,000 vehicles, but reiterated its full-year profit forecasts.
Bitcoin prices slumped below the $19,000 mark in overnight trading, extending losses from the worst quarter on record for the world's biggest cryptocurrency.
Further concerns were triggered by the European Union's move to limit the "wild west" crypto market with the toughest regulations to date. The EU's Markets in Crypto-assets (MiCA) law will require companies to obtain a license, and provide defined customer backstops, in order to sell digital coins in the world's biggest economic bloc.
Bitcoin prices were last seen off slightly at $19,373.16 each, a move that would mark a 72% plunge from the all-time hits it recorded in late November.
TheStreet Reporter Rob Lenihan contributed to this article.
