Morning Minutes

Rising Rates and Falling Profits Drag Stocks Downward




Monday’s small stock market gains quickly evaporated overnight. Signs that central banks remain under pressure to tighten faster and do more about inflation as the US 10-year treasury note yield climbed back up above 3.00% and the Reserve Bank of Australia hiked its benchmark rate by double what the street had been expecting (0.50% increase to 0.85%, street had expected a 0.25% hike to 0.60%).

Meanwhile, the impact of rising inflation on consumers, with staples such as gas and food taking up a bigger part of paycheques and squeezing out discretionary purchases, flared up again today with a profit warning from Target. The big US retailer announced that after marking down prices and cancelling orders to clear out unsold merchandise, management has slashed is operating margin guidance for this quarter down to 2.0% from near 5.0%. Target shares are down 7.5% in premarket action this morning.

After US indices finished flat to up 0.4% yesterday, US index futures are down 0.7% to 1.2% with the NASDAQ leading the way downward as usual. In Europe today the Dax is down 1.1%, while the FTSE is down 0.2%. Commodities are also struggling today with copper down 1.2% and WTI crude oil down 0.2%. Despite chatter in the press that the US is considering regulating cryptocurrencies in a similar way to commodities, Bitcoin and Ethereum are both down about 5.8% while Gold is up 0.4% as investors shift to more defensive stances.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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