June 2022 saw a steep decline in the US stock market as rising inflation, aggressive Federal Reserve rate hikes, and growing recession concerns led to increased investor anxiety. The S&P 500 entered bear market territory, marking a significant pullback as fears of an economic slowdown intensified. Inflation hit new four-decade highs, and the Fed responded by raising interest rates by 0.75%, its largest hike in nearly three decades, signaling that it was ready to take aggressive measures to curb inflation, even at the risk of stalling economic growth.
Corporate earnings showed the strain of rising costs, with many companies struggling to maintain margins due to inflationary pressures. Retailers, in particular, felt the impact. Walmart and Target, which had seen strong growth in previous years, reported disappointing earnings in June. Both companies cited rising supply chain costs, labor shortages, and weaker-than-expected consumer spending as key challenges. Target’s earnings fell short of expectations, and the company warned that inflation would continue to squeeze margins, leading to a drop in its stock price. Walmart’s results also showed a sharp slowdown in its profit growth, especially in categories like electronics and apparel, as rising prices eroded consumer spending power.
On the other hand, energy companies continued to report strong earnings, driven by soaring oil and gas prices. ExxonMobil, Chevron, and other major energy firms saw massive revenue gains from elevated commodity prices, with some even benefiting from increased global demand amid geopolitical instability caused by the Russia-Ukraine conflict. These companies raised their dividends and repurchased shares, which provided some positive news in an otherwise volatile market.
In the financial sector, banks like JPMorgan Chase and Goldman Sachs posted mixed earnings, as higher interest rates provided a boost to net interest income. However, many financial firms also noted rising credit risk and uncertainty over the potential impacts of a slowing economy. Financial partnerships in the fintech sector, including collaborations between traditional banks and digital payment providers like Square and PayPal, continued to thrive, helping to expand revenue streams despite the broader market turbulence.
As the month came to a close, market participants were left grappling with the combined weight of high inflation, rising rates, and the growing risk of a recession, making the economic outlook for the second half of 2022 highly uncertain.
