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U.S. stocks tumbled on Tuesday amid recession worries in a late-session dive. Investors stayed out of equity markets while eagerly awaiting key inflation data. The U.S. 2-year/10-year yield curve remained inverted and hit its lowest level since 2007. All the three major indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.6% or 192.51 points to end at 30,981.33 points. Twenty-one components of the 30-stock index ended in the red, one remained unchanged, while eight ended in the green.
The tech-heavy Nasdaq Composite finished at 11,264.73, dropping 1% or 107.87 points.
The S&P 500 lost 0.9% or 35.63 points to close at 3,818.8. All the 11 broad sectors of the benchmark index closed in the red. The Energy Select Sector SPDR (XLE), the Technology Select Sector SPDR (XLK) and the Health Care Select Sector SPDR (XLV) dropped 2%, 1.4% and 1.3%, respectively.
The fear-gauge CBOE Volatility Index (VIX) increased 4.3% to 27.29. A total of 9.86 billion shares were traded Tuesday, lower than the last 20-session average of 12.79 billion. Decliners outnumbered advancers on the NYSE by a 1.37-to-1 ratio. On Nasdaq, a 1.19-to-1 ratio favored the declining issues.
Investors Brace for June Inflation Report
Investors are bracing for a hot inflation reading scheduled on Wednesday. The CPI report is expected to show inflation gathering heat in June, with year-on-year topline likely to be as high as 8% or 9%. This can push the Fed to further tighten its monetary policy, and 75 basis point interest rate hikes remain in the cards. With the July Fed meeting coming up soon, investors remain worried that a third consecutive rate hike could lead to a massive economic slowdown. This was the main reason for the grim mood in Wall Street on Tuesday, as investors stayed out of equity markets. However, hope still remains, as the “core” CPI numbers, which do not account for the extremely volatile food and energy prices, are expected to confirm that inflation has already peaked. The Fed may ease off on its policy tightening in autumn based on these numbers.
The earnings season commences this week. Investors are going to keep a kin watch on the future business outlook that the big companies slated to release their earnings report are going to provide, rather than the actual earnings numbers, to get the hang of what is about to come in the coming months. They are interested in seeing how companies forecast their downside risk to earnings as markets grapple with rising interest rates, greater inflationary pressures, and the likelihood of a recession.
PepsiCo, Inc. (PEP - Free Report) was the first corporate giant to kick off the second-quarter earnings season. The company has continued to benefit from investments in brands, go-to-market systems, supply chains, manufacturing capacity and digital capabilities to build competitive advantages. PepsiCo reported earnings of $1.86 per share, surpassing the Zacks Consensus Estimate of $1.73. It also posted revenues of $20.23 billion for the quarter ended June 2022, beating the Zacks Consensus Estimate by 2.3%. But more importantly, the company has raised its revenue outlook for 2022 to a 10% increase from the earlier reported 8%, which is good news for the markets. Investors are now eagerly awaiting the reports from the big banks that are slated next week.
Bond Yield Curve Inversion Hits 15-Year Low
Recession fears gathered pace as investors shunned riskier stocks and ran for the safety net of traditional instruments like the U.S. Treasury. The 2-year/10-year yield curve remained inverted and hit its lowest level since 2007. The 2-year dropped to 3.045% but remained above the 10-year Treasury, which dropped to 2.951%. Yields in the bond markets move in an inverse relation to prices, and the widening of the spread between the 2-year and 10-year treasury notes are historically seen as very clear recession warnings.
Economic Data
No economic data was released on Tuesday.
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Stock Market News for Jul 13, 2022
U.S. stocks tumbled on Tuesday amid recession worries in a late-session dive. Investors stayed out of equity markets while eagerly awaiting key inflation data. The U.S. 2-year/10-year yield curve remained inverted and hit its lowest level since 2007. All the three major indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.6% or 192.51 points to end at 30,981.33 points. Twenty-one components of the 30-stock index ended in the red, one remained unchanged, while eight ended in the green.
The tech-heavy Nasdaq Composite finished at 11,264.73, dropping 1% or 107.87 points.
The S&P 500 lost 0.9% or 35.63 points to close at 3,818.8. All the 11 broad sectors of the benchmark index closed in the red. The Energy Select Sector SPDR (XLE), the Technology Select Sector SPDR (XLK) and the Health Care Select Sector SPDR (XLV) dropped 2%, 1.4% and 1.3%, respectively.
The fear-gauge CBOE Volatility Index (VIX) increased 4.3% to 27.29. A total of 9.86 billion shares were traded Tuesday, lower than the last 20-session average of 12.79 billion. Decliners outnumbered advancers on the NYSE by a 1.37-to-1 ratio. On Nasdaq, a 1.19-to-1 ratio favored the declining issues.
Investors Brace for June Inflation Report
Investors are bracing for a hot inflation reading scheduled on Wednesday. The CPI report is expected to show inflation gathering heat in June, with year-on-year topline likely to be as high as 8% or 9%. This can push the Fed to further tighten its monetary policy, and 75 basis point interest rate hikes remain in the cards. With the July Fed meeting coming up soon, investors remain worried that a third consecutive rate hike could lead to a massive economic slowdown. This was the main reason for the grim mood in Wall Street on Tuesday, as investors stayed out of equity markets. However, hope still remains, as the “core” CPI numbers, which do not account for the extremely volatile food and energy prices, are expected to confirm that inflation has already peaked. The Fed may ease off on its policy tightening in autumn based on these numbers.
Consequently, shares of Salesforce, Inc. (CRM - Free Report) and Intuit Inc. (INTU - Free Report) declined 4.6% and 4.2%, respectively. Salesforce carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Q2 Earnings Season Commences
The earnings season commences this week. Investors are going to keep a kin watch on the future business outlook that the big companies slated to release their earnings report are going to provide, rather than the actual earnings numbers, to get the hang of what is about to come in the coming months. They are interested in seeing how companies forecast their downside risk to earnings as markets grapple with rising interest rates, greater inflationary pressures, and the likelihood of a recession.
PepsiCo, Inc. (PEP - Free Report) was the first corporate giant to kick off the second-quarter earnings season. The company has continued to benefit from investments in brands, go-to-market systems, supply chains, manufacturing capacity and digital capabilities to build competitive advantages. PepsiCo reported earnings of $1.86 per share, surpassing the Zacks Consensus Estimate of $1.73. It also posted revenues of $20.23 billion for the quarter ended June 2022, beating the Zacks Consensus Estimate by 2.3%. But more importantly, the company has raised its revenue outlook for 2022 to a 10% increase from the earlier reported 8%, which is good news for the markets. Investors are now eagerly awaiting the reports from the big banks that are slated next week.
Bond Yield Curve Inversion Hits 15-Year Low
Recession fears gathered pace as investors shunned riskier stocks and ran for the safety net of traditional instruments like the U.S. Treasury. The 2-year/10-year yield curve remained inverted and hit its lowest level since 2007. The 2-year dropped to 3.045% but remained above the 10-year Treasury, which dropped to 2.951%. Yields in the bond markets move in an inverse relation to prices, and the widening of the spread between the 2-year and 10-year treasury notes are historically seen as very clear recession warnings.
Economic Data
No economic data was released on Tuesday.