US stocks tumbled Tuesday as global economic growth fears weighed on sentiment and the dollar hit a 19-year high, after investors returned from the three-day July Fourth holiday weekend.
The Dow Jones Industrial Average DJIA
dropped 695 points, or 2.2%, to 30,402, and had been down more than 700 points at its session low.
The S&P 500 SPX
was down 72 points, or 1.9%, at 3,753.
The Nasdaq Composite Comp
fell 95 points, or 0.9%, to 11,
Stocks bounced on Friday, but ended the week with hefty losses after the S&P 500 logged its worst first-half performance since 1970. US equity markets were shut on Monday for the Independence Day holiday.
What’s driving markets
Concerns over whether inflation might spur the Federal Reserve to tighten monetary policy even more aggressively at the expense of economic growth, have weighed on equities even amid short-lived bear market rallies. Such concerns have already contributed to the S&P 500 index falling nearly 21% in the first six months of 2022, its worst half since 1970.
Treasury yields fell Tuesday, with the rate on the 2-year note BX: TMUBMUSD02Y
briefly trading above the 10-year yield BX: TMUBMUSD10Y
after briefly inverting twice earlier this year. A prolonged inversion of the Treasury yield curve is seen as a warning signal of potential recession.
“With stock and bonds signaling a recession is possible, and a lack of clarity on what that means, investors will remain reactionary to news headlines and data points,” said Lindsey Bell, chief markets and money strategist at Ally, in emailed comments.
“This morning, market action is being driven by concerns that rollbacks of US tariffs on Chinese goods may not materialize. I expect the market to remain jumpy in the near-term, as investors anxiously await earnings season, ”she said.
News reports said the Biden administration may roll back tariffs imposed on some Chinese goods – potentially helping to crimp inflation imported into the US
Traders displayed a reluctance to make fresh bullish bets ahead of potential market-moving economic data over the next few sessions and the US second-quarter corporate earnings reporting season, which kicks off next week.
The Federal Reserve on Wednesday will release the minutes for its June interest rate-setting meeting, while Friday sees publication of the June US nonfarm payrolls report. Both will be eagerly scanned by investors for clues to the likely pace of Fed interest rate rises. See US economics calendar.
In data published Tuesday, US factory orders jumped 1.6% in May in a show of strength among manufacturers – but a more recent survey of top executives suggests demand might be waning in tandem with a slowing economy.
Indications that the US central bank is going to be more aggressive in its monetary tightening cycle than its peers is boosting the dollar. The dollar index DXY
rose 0.8% to 106.01, its highest level in more than 19 years, as the euro EURUSD
slipped closer to parity with the greenback.
The buoyant dollar may make life tougher for US exporters, and analysts will be on alert for evidence of currency headwinds when companies reveal their earnings in the coming weeks.
Wall Street analysts’ consensus estimate is for S&P 500 index company revenues to be 10.4% higher than in the same period last year, with 5.6% earnings growth, according to I / B / E / S data from Refinitiv.
“The V-shaped [stock market] recovery is dead this time. The past six months have seen the biggest shift in market sentiment in a lifetime and in Q3, the outlook for global companies’ earnings is not good. The bottom of this bear market could arrive later this year or far away as the first half of 2023, ”said Steen Jakobsen, chief investment officer at Saxo Bank.
There was better news out of China. The world’s second largest economy saw its service sector expand in June at the fastest pace in nearly a year.
Companies in focus
on Saturday said it sold more than 254,000 cars and SUVs from April through June, an 18% drop from the first three months of this year and well below the pace in last year’s final quarter. Shares of the electric-vehicle maker fell 2.4%.
Exxon Mobil Corp.
said in a filing late Friday that it expects a boost of at least $ 2.5 billion to its bottom line in the second quarter from rising prices for oil and gas, with billions more coming from higher margins for gasoline and other energy products. Shares dropped 2.6%.
Oil futures slumped, with the US benchmark CL
down 4.9% to trade above $ 103 a barrel. Gold futures GC00
fell 1.5% to trade below $ 1,775 an ounce.
fell 3.5% to trade near 19,540.
The Stoxx Europe 600 XX: SXXP
fell 1.4%, while London’s FTSE 100 UK: UKX
In Asia, Japan’s Nikkei 225 JP: NIK
rallied 1% to 26,423 and China’s Shanghai Composite CN: SHCOMP
closed barely changed at 3,404. In Europe the Stoxx 600 XX: SXXP
fell 0.7% to 406.5, as investors continued to fret about the damage high energy costs are inflicting on the continent’s economy.