Market close: The big losses - and a few gains - as shares hit bear territory

Markets are spooked ahead of expectations the Federal Reserve will raise rates sharply. Photo / Greg Bowker

Fuelled by further fears about rising inflation and interest rates, New Zealand shares dived into their second bear market in two years with a fall of two and a half per cent on the benchmark index.

The battered S&P/NZX 50 Index closed down 283.37 points or 2.59 per cent to 10,641.36, though it recovered slightly late in the day when bargain hunters entered the market after it had fallen as much as 3.23 per cent.

The local index is now at its lowest ebb in 26 months. There were 139 decliners and just 14 gainers across the main board on volume of 46.5 million share transactions worth $128.23.

One of the few gainers was a2 Milk, up 7c to $4.60 after dropping 9 per cent the day before.

The NZX 50 index is now down more than 20 per cent from its all-time high of 13,558.19 points, set on January 8 last year, triggering an official bear market. The last one lasted just six weeks and before that it was longer during the global financial crisis of 2008-09. And this time around it is expected to be longer, again.

The latest crash started after the US May inflation rose to an unexpected fresh 40-year high of 8.6 per cent, bond yields jumped and the S&P 500 Index reached a bear market, down 21.33 per cent from its start-of-the-year peak of 4793.06. It has now lost US$9.3 trillion ($14.8t) in market capitalisation.

The S&P was down 3.88 per cent overnight to 3749.63 points, and Nasdaq Composite, down 30.9 per cent so far this year, fell 4.68 per cent to 10,809.23. The Dow Jones Industrial Average declined 876 points or 2.79 per cent to 30,516.74 – its high being 36,488.63.

Jeremy Sullivan, investment adviser with Hindin Hamilton Greene, said it looks like the US is entering a recession and the bear market could last 12 months.

"Anything can turn on a dime but interest rates are only going one way in the US and here as the central banks tighten monetary policy and reduce liquidity in the system.

"The central banks came to the rescue last time by printing money but they won't be doing it this time as they need to get on top of inflation. Analysts are predicting a 28 per cent chance of the US Federal Reserve increasing interest rates by 75 basis points later this week – that's a triple hike than normal," said Sullivan.

Except for a2 Milk, no leading New Zealand stock could hide from the latest dive – with the Australian S&P/ASX 200 Index falling 3.84 per cent to 6665.6 at 6pm NZ time.

Market leader Fisher and Paykel Healthcare was down 50c or 2.5 per cent to $19.50; Auckland International Airport fell 21c or 2.81 per cent to $7.27; Spark declined 15c or 3.21 per cent to $4.53; Fletcher Building shed 28c or 5.36 per cent to $4.94; Freightways decreased 25c or 2.51 per cent to $9.70; and Mainfreight was down $2.60 or 3.57 per cent to $70.20.

Among the energy stocks, Contact fell 31c or 4.18 per cent to $7.10; Mercury was down 15c or 2.72per cent to $5.36, and Manawa Energy (formerly Trustpower) declined 12c or 1.87 per cent to $6.30.

Meridian decreased 8c to $4.43 after reporting a 4.4 per cent increase in retail sales volumes in May. Agricultural sales were up 11.3 per cent, small medium business 7.6 per cent and large business increased 8.6 per cent.

Vector, unchanged at $4.25, announced an interest rate of 6.23 per cent for its capital bonds running through to June 2027.

The retirement village operators were hit again. Ryman Healthcare was down 20c or 2.26 per cent to $8.65; Summerset Group Holdings fell 37c or 3.74 per cent to $9.52; Arvida Group declined 6c or 4.03 per cent to $1.43; and Oceania Healthcare decreased 4c or 4 per cent to 96c.

Retailers Hallenstein Glasson fell 38c or 6.81 per cent to $5.20, and Briscoe Group was down 14c or 2.5 per cent to $5.46

Chorus decreased 23.5c or 3.26 per cent to $6;.97; Skellerup Holdings was down 17c or 3.37 per cent to $4.88; Rakon fell 7c or 5.22 per cent to $1.27; Pushpay Holdings lost 9c or 6.47 per cent to $1.30; and Harmoney declined 7c or 6.86 per cent to 95c.

SkyCity Entertainment was down 1c to $2.78 after telling the market its full-year operating earnings (ebitda) would be $135m-$140m and net profit $3.5m-$7m. SkyCity has seen strong performance in its local gaming business since the Covid restrictions were relaxed.

Other gainers were Steel & Tube, up 4c or 3.23 per cent, to $1.28; Tourism Holdings gaining 3c to $2.63; Gentrack rising 5c or 3.4 per cent to $1.52; and Geneva Finance increasing 2.7c or 4.71 per cent to 60c.