Stocks Fall on Rising Interest Rates, Oil Prices, and Earnings Misses
Rising interest rates and oil prices, with a few misses by big financial companies like Goldman Sachs (GS), appear to have been too much for investors who were selling stocks on Tuesday. The VIX (Cboe Market Volatility Index) rallied 18.76% to 22.79, reflecting a rise in investor uncertainty around the financial markets. The S&P 500 (SPX) fell 1.84% as investors sold stocks. However, investors were also selling bonds, driving the 10-year Treasury yield (TNX) up 5.25% to 1.865%. In contrast, the 10-year yield was closed at 1.343% on December 3,2021, which was its most recent low. An asset that investors appear to be buying is crude oil. Oil prices rose 2.74%, breaking above its November 2021 highs and creating a new seven-year high. Rising oil prices seemed to help energy stocks, which was the best-performing sector on a day when all other sectors finished in the red. Rising rates normally help financial stocks, but they were the worst-performing sector on the day thanks to earnings misses. The 2-year Treasury yield also rose above the 1% mark. Some investors may see this as a sign that the Fed is going to have raise rates more than Chairman Jerome Powell had originally targeted. After the December Fed meeting, Chair Powell said that the Fed was targeting 0.90% by the end of 2022. The 2-year yield tends to be the most correlated with the Fed’s moves, which is why investors are now looking at the potential that the Fed may have to raise rates higher and sooner. The CME FedWatch Tool is currently discounting a 91.6% chance that the Fed will raise the overnight rate by a quarter of point in March. Despite the sell-off, some stocks were moving on merger and acquisition news. Bloomberg reported that Citrix (CTXS) may be a target for Elliott Investment Management and Vista Equity Partners. The news caused Citrix to rally 5.
