Jeffrey Kleintop, Charles Schwab chief global investment strategist, and Ann Miletti, Allspring Global Investments head of active equity, join 'Squawk on the Street' to discuss recent weakness in the equity markets, how geopolitical risks could affect commodities and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
The sell-off of U.S. stocks in 2022 gained intensity Monday as investors dumped risky assets like equities in anticipation of a less friendly Federal Reserve.
The Dow Jones Industrial Average lost more than 1,000 points at one point and the decline in the S&P 500 from its record touched the 10% threshold, though stocks eased off their lows of the session.
The Dow Jones Industrial Average fell about 670 points, or 2%, falling for a seventh straight day. At its lows of the day, the blue-chip index shed about 1,115 points. The S&P 500 lost 2.2% and headed for its worst month since March 2020. The benchmark is down more than 10% from its intraday high. The Nasdaq Composite declined 2.1%, falling deeper into correction territory down more than 16% from its intraday high.
“I think there’s more pain to come,” said Wharton School finance professor Jeremy Siegel on CNBC’s “Squawk Box.” “When a bear market comes, it doesn’t spare the good stocks or the bad stocks. I mean, they all go down.”
Monday’s pullback put the S&P 500 down roughly 9% this month, on pace for its worst January performance on record. The Dow was also headed for its biggest one-month loss since March 2020, falling more than 7%. The Nasdaq, meanwhile, has dropped nearly 14% in January and is on pace for its worst month since October 2008 — when it plunged 17.7%.
The rout this year initially centered around the Nasdaq and technology stocks with investors rotating out of shares whose valuations look less attractive as rates rise. While the 10-year Treasury yield was lower Monday, the benchmark rate has jumped about a quarter of a percentage point in 2022.
However, lackluster earnings reports and geopolitical tensions have caused the selling to spread across equity markets.
Monday’s sell-off was broad-based with less than 20 stocks in the S&P 500 and just 3 names in the Dow trading positively. Signature Bank led losses on the S&P 500, falling more than 7%. Visa was the top decliner on the Dow with a more than 3% loss.
Tech was the hardest hit sector with Microsoft, Apple and Alphabet all losing about 2%. The more speculative Tesla lost 5%, bringing its year-to-date losses to more than 15%. Netflix continued its decline post-earnings report, losing more than 5%.
The CBOE Volatility Index (VIX), known on Wall Street as the market’s “fear gauge,” hit its highest level since November 2020, surpassing the 38 level at its intraday highs. The market action Monday followed a brutal week on Wall Street in the face of mixed company earnings and worries about rising interest rates.
The fourth-quarter earnings season has been a mixed bag. While more than 74% of S&P 500 companies that have reported results have topped Wall Street estimates, a couple of key firms let down investors last week, like Netflix and Goldman Sachs.
Investors are eyeing the Fed’s policy meeting, which wraps up on Wednesday. Market participants will be looking for any signals on how much the central bank will raise interest rates this year and when it will start.
“The greatest fear is how the Fed reacts and keeps this balancing act,” Ann Miletti, head of active equity at Allspring Global Investments, told CNBC’s “Squawk on the Street” on Monday. “There’s going to be a lot of turbulence as we march through these next couple of months.”
The Federal Open Market Committee, which sets interest rates, is meeting with expectations that it will not act at this meeting but will tee up the first of multiple rate hikes starting in March. In addition, the Fed is expected to wrap up its monthly asset purchase program that same month.
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