A brutal wave of selling spurred by the triple-whammy of rising inflation, higher interest rates and fears of recession sent Chicago-area stocks tumbling alongside the broader market in the first half of the year.
As of midday on June 30, a Bloomberg index of Illinois-based companies was down 19.12% for the year to date.
That’s slightly better than the 20.95% decline for the S&P 500. But the reasons for Illinois’ small edge isn’t particularly encouraging. The state has none of the major technology companies that have taken a particularly painful pounding this year. The Nasdaq 100 Technology Sector Index, which includes the likes of Apple, Meta, Microsoft and Google parent Alphabet, is down 34.45%.
What Illinois does have is a lot of big companies spanning multiple sectors hurt by the deteriorating macroeconomic climate.
Zebra Technologies was the leading local loser among companies with market capitalizations of $10 billion or more. Shares of Vernon Hills-based Zebra fell by about half, after quarterly earnings fell short of analyst expectations early in the year and supply chain backups led management to dial back revenue forecasts, never a good look for a growth stock. Zebra makes advanced inventory management devices such as RFID scanners and bar code printers, straddling the border between technology and manufacturing, another segment hit hard by worries about supply chains, inflation and recession.
Other Illinois industrial stocks hurt by those concerns include aerospace manufacturer Boeing, down 31.2%. Boeing continued struggling through production problems with its 737 Max and 787 Dreamliner jets, under a cloud of worry about future air travel demand if the economy tips into recession. Diversified manufacturers Dover and Illinois Tool Works saw their shares decline by 33.23% and 26.75%, respectively. Farm equipment giant Deere fell 12.32%, while construction equipment maker Caterpillar dropped 11.58%.
Tumbling stock markets and quick-step interest rate hikes from a Federal Reserve scrambling to catch up with inflation hurt local financial stocks. Financial information provider Morningstar suffered the most, falling 29.46%. Northern Trust, which makes much of its revenue from fees tied to the value of clients’ investments, sank 17.45%. Credit card lender Discover Financial fell 17.28% as Wall Street worried that loan defaults will rise as inflation squeezes consumers.
Even local exchange operators, which offer traders the opportunity to profit from stock market declines and interest rate increases, have yet to see their own shares benefit from turbulent financial markets. Shares of CME Group, which conducts trading in agricultural and financial derivatives, sagged 9.77%. CBOE Group, which offers options trading and the VIX, or “fear index,” fell 12.65%.
Shelter was hard to find with investors fleeing so many industries. Agriculture provided a haven as the war in Ukraine squeezed wheat supplies, helping to drive up commodity prices.
Fertilizer supplier CF Industries was the biggest local stock market winner, with a 22.03% rise in its share price. The company reported that first-quarter revenue tripled and profit rose sixfold after shortages caused by the war sent crop nutrient prices soaring.
Agricultural processing and trading giant ADM also capitalized on the supply crunch, which boosted its first-quarter profit by more than half. ADM shares are up 14.28% this year.
Utility stocks, a traditional safety zone for risk-averse investors, posted more-modest gains. Exelon, which owns northern Illinois utility Commonwealth Edison and other electricity providers on the East Coast, rose 6.6%. Shares of northwest Indiana-based NiSource climbed 6.7%.
Packaged foods, another major local industry, produced mixed results for investors. Mondelez, known for such snacks as Oreo cookies and Ritz crackers, fell 6.42% on concerns about rising costs and supply chain bottlenecks. Mondelez’s former sister company Kraft Heinz, which sells cheese, cold cuts and other grocery staples, rose 5.79% amid signs that sales are holding up despite price increases to offset rising costs. Shares of Conagra, which makes a range of frozen foods and other offerings, held essentially flat, reflecting uncertainty about future economic conditions and their impact on demand.
The short-term future for local stocks is hard to project. Although many are quite a bit cheaper than they were a year ago, profit pressures show no sign of abating, and a serious recession could hurt future revenue growth, making today’s share prices look higher than they now appear.
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