Stocks Finish Monday’s Session in Negative Territory
Last Updated 4:20 PM EST
Stock indices finished Monday’s trading session in negative territory as investors wait for important economic data to be released later on in the week. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 decreased 0.52%, 1.15%, and 2.19%, respectively.
The communications sector was the session’s laggard, as it declined by 3.03%. Conversely, the utilities sector was the session’s leader, with a gain of 0.63%. In addition, WTI crude oil remained above $100 per barrel despite the possibility of lower demand due to a potential recession. At around $103 per barrel, it is off the session low of $100.92.
Furthermore, Treasury yields fell today, with the U.S. 10-Year Treasury yield crossing just below 3% to 2.991%, a decrease of over nine basis points. However, the Two-Year Treasury yield remains higher at 3.07%. This brings the spread between them to -7.9 basis points.
Compared to Friday, the market is now pricing in a higher chance of a lower Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 3.25% to 3.5% increased to 39.8%, which is up from Friday’s expectations of 34.4%.
Long-Term Inflation Expectations are Declining
Last Updated 3:15PM EST
Equity markets are in the red heading into the final 45 minutes of today’s trading session. As of 3:15 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.6%, 1.2%, and 2.2%, respectively.
On Monday, the Federal Reserve Bank of New York released a report that suggests long-term inflation expectations are falling. The survey shows that consumer expectations for inflation over the next three years fell from 3.9% in May to 3.6% in June.
The same can be said for five-year expectations, which declined slightly from 2.9% to 2.8%. The drop in long-term expectations can be attributed to a fall in the projected increase in home prices. Interestingly, near-term inflation expectations actually increased to 6.8% over the next year as opposed to the previous expectation of 6.6%.
Nevertheless, the drop in long-term expectations is desirable in the eyes of the Federal Reserve. This is because it is believed that high inflation expectations actually lead to higher inflation because high expectations can cause people to spend money quicker in anticipation of rising prices.
Thus, the Federal Reserve will look at this data and see that it’s accomplishing its goal of anchoring inflation expectations.
Average Gas Prices are Trending Down
Last Updated 12:05PM EST
Stocks remain negative halfway into Monday’s trading session. As of 12:05 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.4%, 1.1%, and 2%, respectively.
The communications sector remains the laggard so far, as it is down almost 2.7%. Conversely, the health sector (XLV) is the session’s leader, as it is flat on the day.
In addition, WTI crude oil is currently hovering around the mid-$103 per barrel range, as it has recovered most of its losses from earlier on in the day and is well off the low of $100.92 per barrel.
The commodity’s recent pullback has led to lower gas prices across the country. Undoubtedly, consumers welcome the drop because inflation has been cutting into their spending power. The national average for regular gas is now $4.678 per gallon, down significantly from the all-time high of $5.016 per gallon on June 14.
The highest price can be found in California, where prices are substantially higher than the national average, at $6.088 per gallon. On the other hand, South Carolina just beat out Georgia for the state with the lowest gas price, at $4.181 per gallon.
There’s no doubt that consumers hope this downward trend continues. However, the Federal Reserve hopes that prices will come down without having to force a recession.
Stocks are Red to Start Monday’s Trading Session
Last Updated 10:00AM EST
Stocks are negative 30 minutes into Monday’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.4%, 1.1%, and 2.2%, respectively.
The communications sector (XLC) is the laggard so far, as it is down more than 2.5%. Conversely, the utilities sector (XLU) is the session’s leader, with a gain of 0.2%.
WTI crude oil is slipping as its downward momentum resumed after climbing back up over $100. Currently, its price is hovering around $102 per barrel, which equates to a decrease of 2.6% from the previous close. Fortunately for consumers, it is still way off its highs due to recession fears.
Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 3%. This represents a decrease of over eight basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3.04%. This means that the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -4 basis points.
Pre-Market Update
Stock market futures lost momentum early in the morning on Monday as a new week of major earnings and key inflation data releases begins.
Futures on the Dow Jones Industrial Average (DJIA) lost 0.47%, while those on the S&P 500 (SPX) moved 0.65% lower, as of 8:33 a.m. EST, Monday. Meanwhile, the Nasdaq 100 (NDX) futures retracted 0.73%.
The job market had remained hot in June, as revealed in Friday’s jobs report. The number of jobs added to the economy was 372,000 as compared with the consensus estimate of 250,000. This gave investors some relief from the constant worry of a downturn.
Last week ended positively for all the three major indexes, particularly the Nasdaq 100, which recorded net gains every day of the week. On Friday, the Dow and the S&P 500 ended the regular trading session with losses of 0.15% and 0.08%, respectively. Meanwhile, the Nasdaq 100 closed 0.14% higher.
However, the 2-year Treasury yield remained greater than the 10-year yield, which has historically been a trend during or just before a recession.
Also, many believe that the strong jobs market might encourage the Federal Reserve to comfortably continue to raise the interest rates higher than expected.
PepsiCo (PEP), Delta Air Lines (DAL), JPMorgan Chase (JPM), Morgan Stanley (MS), Wells Fargo (WFC), and Citigroup (C) are set to report earnings this week.
Most importantly, headline inflation data for June, the consumer price index, is scheduled to release this Wednesday. Estimates show that the metric is likely to have been more than May’s 8.6% level.
Again, on Thursday, the June producer price is expected to be out. Moreover, Friday will see the release of the University of Michigan consumer sentiment report for July.
