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Wall Street closed slightly lower in a choppy session on Tuesday, dragged down by rising geopolitical tension between the United States and China over Nancy Pelosi’s visit to Taiwan. Recession fears kept getting stoked as comments came in from several Fed officials, indicating that interest rates would keep going up. All the three major stock indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) lost 1.2% or 402.23 points to close at 32,396.17. Twenty-five components of the 30-stock index ended in red, while four ended in green and one remained unchanged.
The tech-heavy Nasdaq Composite finished at 12,348.76, dropping 0.2% or 20.22 points.
The S&P 500 fell 0.7% or 27.44 points to end at 4,091.19. All the 11 broad sectors of the index closed in the red. The Real Estate Select Sector SPDR (XLRE), the Financials Select Sector SPDR (XLF) and the Industrials Select Sector SPDR (XLI) lost 1.3%, 1.1% and 1.1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 4.8% to 23.93. A total of 11.2 billion shares were traded Tuesday, higher than the last 20-session average of 10.8 billion. Decliners outnumbered advancers on the NYSE by a 1.21-to-1 ratio. On Nasdaq, a 1.06-to-1 ratio favored advancing issues.
Speaker Pelosi’s Visit to Taiwan Flares Up Tension
For the last two days, rumors were rife on whether Nancy Pelosi, Speaker of the U.S. House of Representatives, would actually make an unannounced visit to Taiwan, as was widely reported. China had warned against the visit and had said that it would have dire consequences because China considers Taiwan as its sovereign territory. Pelosi arrived in Taiwan late on Tuesday on the trip as expected, showing an unwavering American commitment to the China-claimed self-ruled island, despite the latter condemning the highest-level U.S. visit in 25 years as a threat to peace and stability in the region. China responded by sending warplanes to the line dividing the Taiwan Strait before her arrival. The military was put on high alert, and air and sea-drills, and test missile launches were announced for the next few days. The United States, in turn, positioned four warships, including the aircraft carrier USS Ronald Reagan, toward the east of Taiwan in what it dubbed routine deployments.
Rising tension in Sino-U.S. relations had an adverse impact on markets that were already reeling under recessionary fears. However, the one sector that got a boost in the session was defense. The United States is Taiwan’s main arms supplier.
Fed Officials Signal Continued Interest Rate Hikes
Hawkish comments coming in from Fed officials on Tuesday dampened investor mood amid already prevalent recession fears. San Francisco Fed President Mary Daly said that she was puzzled by the fact that bond market prices reflected investor expectations for the central bank to shift to rate cuts in the first half of next year. She said that her expectations were to the contrary and that the Fed will keep raising rates for now and then hold them there. Cleveland Fed President Loretta Mester said that inflation is yet to peak and several months of compelling evidence are needed before concluding that inflation is on a sustainable path down to the central bank's target of 2%. Chicago Fed President Charles Evans said that he did not rule out the possibility of a 75 basis point hike in rates in the next Fed meeting.
Markets turned to a sell-off on the perception that the Fed is still unbending on its quest to dampen demand. Apprehensions remain strong that, for a market which has already entered a “technical recession,” the hawkish stance from the Fed will facilitate an accelerated slowdown.
Economic Data
The U.S. Labor Department published its JOLTS report on Tuesday. Job openings dropped by 605,000 to 10.7 million in June, the biggest decline since April 2020. Job openings have been declining steadily since hitting a record high of 11.9 million in March.
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Stock Market News for Aug 3, 2022
Wall Street closed slightly lower in a choppy session on Tuesday, dragged down by rising geopolitical tension between the United States and China over Nancy Pelosi’s visit to Taiwan. Recession fears kept getting stoked as comments came in from several Fed officials, indicating that interest rates would keep going up. All the three major stock indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) lost 1.2% or 402.23 points to close at 32,396.17. Twenty-five components of the 30-stock index ended in red, while four ended in green and one remained unchanged.
The tech-heavy Nasdaq Composite finished at 12,348.76, dropping 0.2% or 20.22 points.
The S&P 500 fell 0.7% or 27.44 points to end at 4,091.19. All the 11 broad sectors of the index closed in the red. The Real Estate Select Sector SPDR (XLRE), the Financials Select Sector SPDR (XLF) and the Industrials Select Sector SPDR (XLI) lost 1.3%, 1.1% and 1.1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 4.8% to 23.93. A total of 11.2 billion shares were traded Tuesday, higher than the last 20-session average of 10.8 billion. Decliners outnumbered advancers on the NYSE by a 1.21-to-1 ratio. On Nasdaq, a 1.06-to-1 ratio favored advancing issues.
Speaker Pelosi’s Visit to Taiwan Flares Up Tension
For the last two days, rumors were rife on whether Nancy Pelosi, Speaker of the U.S. House of Representatives, would actually make an unannounced visit to Taiwan, as was widely reported. China had warned against the visit and had said that it would have dire consequences because China considers Taiwan as its sovereign territory. Pelosi arrived in Taiwan late on Tuesday on the trip as expected, showing an unwavering American commitment to the China-claimed self-ruled island, despite the latter condemning the highest-level U.S. visit in 25 years as a threat to peace and stability in the region. China responded by sending warplanes to the line dividing the Taiwan Strait before her arrival. The military was put on high alert, and air and sea-drills, and test missile launches were announced for the next few days. The United States, in turn, positioned four warships, including the aircraft carrier USS Ronald Reagan, toward the east of Taiwan in what it dubbed routine deployments.
Rising tension in Sino-U.S. relations had an adverse impact on markets that were already reeling under recessionary fears. However, the one sector that got a boost in the session was defense. The United States is Taiwan’s main arms supplier.
Consequently, shares of L3Harris Technologies, Inc. (LHX - Free Report) and Lockheed Martin Corporation (LMT - Free Report) gained 1.2% and 2.3%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Fed Officials Signal Continued Interest Rate Hikes
Hawkish comments coming in from Fed officials on Tuesday dampened investor mood amid already prevalent recession fears. San Francisco Fed President Mary Daly said that she was puzzled by the fact that bond market prices reflected investor expectations for the central bank to shift to rate cuts in the first half of next year. She said that her expectations were to the contrary and that the Fed will keep raising rates for now and then hold them there. Cleveland Fed President Loretta Mester said that inflation is yet to peak and several months of compelling evidence are needed before concluding that inflation is on a sustainable path down to the central bank's target of 2%. Chicago Fed President Charles Evans said that he did not rule out the possibility of a 75 basis point hike in rates in the next Fed meeting.
Markets turned to a sell-off on the perception that the Fed is still unbending on its quest to dampen demand. Apprehensions remain strong that, for a market which has already entered a “technical recession,” the hawkish stance from the Fed will facilitate an accelerated slowdown.
Economic Data
The U.S. Labor Department published its JOLTS report on Tuesday. Job openings dropped by 605,000 to 10.7 million in June, the biggest decline since April 2020. Job openings have been declining steadily since hitting a record high of 11.9 million in March.