US stocks tumbled Tuesday afternoon, falling to their lowest levels of the day during the last hour of trading as investors braced for the June consumer price index data due for release Wednesday.
How are stocks trading
-
The Dow Jones Industrial Average DJIA
was down 140 points, or 0.4%, to 31,036. -
The S&P 500 SPX
was down 31 points, or 0.9%, to 3,821. -
The Nasdaq Composite Comp
shed 111 points, or 1%, to 11,261.
On Monday, the Dow fell 164 points, or 0.5%, while the S&P 500 declined 1.2% and the Nasdaq Composite dropped 2.3%.
What’s driving markets
After a fleeting rebound off the 18-month lows the S&P 500 index touched in mid-June, the mood was again cautious on Tuesday as the strong dollar weighed on sentiment ahead of Wednesday’s consumer-price index for June, while the second-quarter corporate earnings reporting season starts on Thursday.
With the inflation report looming large on the economic data calendar, investors appear reluctant to open new positions ahead of the data, even as the White House has preemptively dismissed the report as already out of date.
“The overarching driver of trade today is the CPI report tomorrow and investors’ reluctance to get out directionally one way or the other in advance of it,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
See: US inflation is still rising. Can it reach 9%?
Traders remain wary about the prospects for corporate profits also amid signs of slowing global economic growth and heightened inflation, although declining commodity prices have spurred hopes that the Federal Reserve might be able to transition back to cutting interest rates as soon as next year.
“There’s been some talk of peak inflation in the US due – among other reasons – to a fall in some agriculture food prices. After all, it was the soaring prices of wheat, corn and other soft commodities, as well as energy, that have boosted inflation so much over the past year or so, ”said Fawad Razaqzada, financial markets analyst at City Index. “With these prices coming down a little, this is clearly some good news – and some light at the end of the tunnel.”
The drop in commodity prices, however, may not be reflected in the June consumer price index due Wednesday, he said. “So, just like May, there is a risk that inflation could overshoot again. If so, this will likely trigger fresh gains for the dollar. “
See also: ‘The good, the bad and the ugly’: here’s how the market might react to the latest US inflation data
As for the dollar. Investors are worried about how a surging US currency may impact corporate earnings, Luschini added.
“Investors are thinking about what it means in terms of tightening financial conditions, plus the fact that it will work to be counterproductive to earnings,” Luschini added.
The dollar has soared versus major rivals in 2022, but pulled back from a 20-year high for the ICE US Dollar Index DXY
Tuesday after the euro EURUSD
came tantalizingly close to hitting parity versus the US currency for the first time in around two decades.
Read: Euro pauses at parity. But what comes next?
Big US banks will kick off the second quarter earnings reporting season proper in coming days, with JPMorgan Chase JPM
and Morgan Stanley MS
on Thursday, and Citigroup C
and Wells Fargo WFC
on Friday.
Expectations are for limited earnings growth. Analysts are forecasting an average 4.3% increase for companies in the S&P 500, which would be the weakest since the end of 2020, according to FactSet.
Three months ago analysts were projecting growth of 5.9%, and the difference reflects building concerns that rampant inflation, and the consequent higher borrowing costs imposed by central banks to counteract it, have caused profit margins to compress.
As for economic data Tuesday, the National Federation of Independent Business said its small-business optimism index fell 3.6 points to 89.5, the lowest level since the first few months of the pandemic in 2020. The index has declined during five of the past six months. . Meanwhile, 34% of survey respondents said inflation is their primary concern, the highest percentage since 1980 – a sign that inflation has continued to hurt small businesses, which do not share the pricing power of large corporations.
The US 10-year Treasury yield BX: TMUBMUSD10Y
fell 3.5 basis points to 2.958% as traders sought the relative safety of government debt.
Companies in focus
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Shares of PepsiCo Inc.
PEP
rose 0.1% after the beverage and snack giant reported fiscal second-quarter profit and revenue that were well above expectations, and affirmed its full-year outlook. -
Peloton
PTON
shares were up more than 2% after the fitness company announced it will outsource its manufacturing. -
Cloud-computing giant ServiceNow Inc.
NOW
fell sharply on Tuesday after its CEO discussed economic headwinds affecting the business during an interview with CNBC’s Jim Cramer. Shares were down more than 12%. Salesforce Inc.CRM
a competitor and Dow component, appeared to decline in sympathy. -
Boeing Company
BA
shares surged more than 7% after reporting strong deliveries data for the second half of last year.
Other markets
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Wall Street’s overnight dive left Asian bourses on the back foot. Hong Kong’s Hang Seng HK: HSI fell 0.9% and the Nikkei 225 JP: NIK in Japan slumped 1.8% after a measure of inflation hit 9.2%, higher than expected. The Stoxx Europe 600 XX: SXXP rose 0.4%, while the FTSE 100 UK: UKX
gaiend 0.2% in London. -
The stronger dollar rippled across markets, pressuring products denominated in the buck. WTI crude CL.1 fell 7% to trade near $ 97 a barrel. Gold GC00 was flat at $ 1,731.70 an ounce.
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Bitcoin BTCUSD once again fell below $ 20,000, dropping 0.4%.
.