Stocks fell further after weak consumer spending data fueled fears of a recession, with the S&P 500 suffering its worst first-half drop since Nixon's presidency.
It was a rout for the record books, with the benchmark index falling 21% in the first six months of the year, the most since 1970. Superlatives continued to pile up on Wall Street, with 10-Yr US yields falling to around 3% from a decade high of 3.5% in mid-June. The dollar experienced its best quarter since 2016. Bitcoin has dropped nearly 60% since the end of March, the most since the third quarter of 2011.
Consumer spending in the United States fell for the first time this year, indicating that the economy is on a weaker footing than previously thought in the face of rapid inflation and Fed hikes. The belief that central banks must act quickly because they misjudged inflation has roiled markets, with traders increasing their bets that the economy will collapse under aggressive tightening.
Key segments of the world's largest bond market, such as the spread between five and ten-year yields, have inverted, indicating bets that higher interest rates will harm the economy.
In recent months, a strategy that had worked well for a decade has been met with new market lows. Traders have abandoned the "buy-the-dip" mantra in favor of the "sell-the-rally" strategy. As a result, the S&P 500 has entered a bear market for the second time since 2020, having fallen more than 20% from its January peak.
Goldman Sachs strategists noted earlier this week that US profit margin estimates are far too optimistic, putting stocks at risk of further declines if Wall Street analysts lower their expectations. Lisa Shalett of Morgan Stanley said on Monday that analysts need a reality check on their earnings projections for this quarter.
