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Stock Market Today: Stocks Fall as ECB Unveils Rate Hike Plan

Stocks extended this week’s decline on Thursday amid another choppy trading session. Attention turned today to the latest European Central Bank (ECB) meeting, which comes ahead of next week’s Federal Reserve policy update. While the ECB has maintained the status quo for now, it revealed plans to raise rates, likely by 25 basis points (a basis point is one-hundredth of a percentage point), or 0.25%, in July and again in September. It also said it would end its bond purchase program on July 1.

Back home, meanwhile, data from the Labor Department showed weekly jobless claims rose 27,000 to a seasonally adjusted 229,000 in the week ending June 3, their highest level since mid-January.

“The market has been looking for some direction amid a relatively quiet week on the economic data front,” says Mike Loewengart, Managing Director of Investment Strategy at E*TRADE. “An increase in jobless claims may not be the catalyst, but in a perverse way, an increase in jobless claims could be an indicator that the Fed’s rate hike plan is slowing demand and could stop the landing. But with a Fed decision on the horizon and with the ECB signaling rate hikes in their future, investors will likely continue in ‘wait and see’ mode.”

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The “wait and see” mode was evident early on in today’s trading, but losses for broad market indices accelerated as the session progressed ahead of the release of the latest Consumer Price Index (CPI) tomorrow morning. Selling was also broad based, with all 11 sectors ending in the red, led by big declines for finance (-2.5%) and technology (-2.7%).

At closing, the Dow Jones Industrial Average it fell 1.9% to 32,272, the S&P 500 Index fell 2.4% to 4,017 and the Nasdaq Composite – which briefly traded in positive territory mid-morning – tumbled 2.8% to 11,754.

stock price chart 060922

Other news in the stock market today:

  • us crude oil futures it fell 0.3% to settle at $121.63 per barrel.
  • gold futures it fell 0.2% to close at $1,852.80 an ounce.
  • Bitcoin it was down 0.3% at $29,989.54. (Bitcoin operates 24 hours a day; prices reported here are as of 4 pm)
  • It has been a difficult stretch for Goal (TGT), down more than 30% in consumer discretionary stocks in the past month following a negative earnings reaction and current quarter operating margin warning. The retailer today tried to right the ship by announcing that it will increase its quarterly dividend by 20% to $1.08 per share, but the shares still fell 1.4%. Despite recent problems, Argus Research analyst Chris Graja maintained a buy rating on him. While risks remain, such as reduced consumer spending amid elevated inflation and higher raw material costs, “we believe Target has the right strategy and has made the right investments to win market share.”
    share over time,” Graja writes in a note.
  • Cruise stocks were some of the biggest decliners on Wall Street today, with Carnival (CCL), Royal Caribbean Cruises (RCL) and Norwegian Cruise Line Holdings (NCLH) yielding 9.3%, 8.3% and 9.2%, respectively.

Is it time to go back to small caps?

Small-cap stocks also suffered significant losses in today’s trading, with the Russell 2000 Index shedding 2.1% to close at 1,850. The benchmark index has lagged its larger-cap peers over the past 12 months, down 19.3% (compared to losses of 6.7% for the Dow Jones, 5.0% for the S&P 500 and 15.6% of the Nasdaq). Given this long stretch of underperformance, will the tides turn for small caps?

“Small-cap stocks tend to have a relatively high beta, implying that they perform better when the economic environment is improving,” says BCA Research in a note. “Slowing global growth is therefore a headwind for small-cap stocks. In addition, they are more vulnerable to negative dynamics from inflationary pressures due to their typically smaller profit margins.”

However, the investment research firm says that the poor long-term performance of small caps could suggest that many of these growth concerns are already priced in. Additionally, many smaller-cap stocks are now “extremely attractive on a valuation basis, which could support their performance.” forward,” adds BCA.

Investors looking to dive into small-caps but still wary of potential risks may want to consider these exchange-traded funds (ETFs), which help provide more diversified exposure. But for those ready to dive in, here are 12 of Wall Street’s favorite small-cap stocks right now. We examined the Russell 2000 to find the top-rated picks among small businesses, and every name listed here is projected to generate outsized returns over the next 12 months or so. Look at them.

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