Stocks Finish in Negative Territory; IMF Lowers Global GDP Forecast
Last Updated 4:30PM EST
Stock indices finished Tuesday’s trading session in the red, as Walmart’s earnings report spooked the market. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell 0.71%, 1.15%, and 1.96%, respectively.
The consumer discretionary sector was the session’s laggard, as it fell by 3.23%. Conversely, the utilities sector (XLU) was the session’s leader, with a gain of 0.61%. In addition, WTI crude oil is down over 1% despite starting the day in the green. It is currently hovering around $95 per barrel.
Furthermore, the U.S. 10-Year Treasury yield increased slightly to 2.805%, a gain of 0.5 basis points. Similarly, the Two-Year Treasury yield also increased, hovering around 3.06%. This brings the spread between them to -25.5 basis points. The negative spread indicates that investors still have fears of a recession.
Moreover, the International Monetary Fund announced that it would be slashing its global growth projections for 2022 and 2023 to 3.2% and 2.9%, respectively. Previously, in April, growth was forecast to be 3.6% in both 2022 and 2023. The IMF attributed the downgrade to the usual suspects – inflation, tighter financial conditions, and the lockdowns in China.
Home Prices Increased in the Month of May
Last Updated 3:00PM EST
Equity markets are in the red heading into the final hour of Tuesday’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.7%, 1.2%, and 2%, respectively.
The consumer discretionary sector is the laggard so far, as it is down 3.2%. Conversely, the healthcare sector (XLV) is the session’s leader, with a gain of 0.7%.
On Tuesday, Standard & Poor’s released its United States S&P/Case-Shiller House Price Index Composite – 20 n.s.a. This report measures the change in house prices in 20 metropolitan areas.
On a year-over-year basis, home prices increased 20.5% in May, lower than the expected 20.6%. This is the first month out of the last six that the growth rate has not accelerated. However, prices increased 1.5% on a month-over-month basis compared to 2.2% in April, decelerating for the second month in a row.
However, it’s important for investors to remember that this report is for May, meaning that there is quite a substantial lag in the data. It is likely that growth will continue to decelerate as the cost to finance a home continues to rise amid high inflation.
Consumer Confidence Comes in Worse than Expected
Last Updated 12:05PM EST
Stocks are negative halfway into Tuesday’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 0.6%, 1.2%, and 1.8%, respectively.
On Tuesday, the Conference Board released its Consumer Confidence report, which, as the name suggests, measures the consumers’ confidence in the economy. This report is believed to be a leading indicator for spending patterns as optimistic consumers are more likely to spend as opposed to pessimistic ones.
For July, consumer confidence came in at 95.7, which was worse than expectations of 97.2. For reference, this reading is lower than what was seen in June 2020, when COVID-19 fears were weighing down on sentiment. Nowadays, it is inflation and recession fears that are negatively impacting how consumers feel.
It’s also worth noting that consumer confidence has been trending down since its post-pandemic peak of 128.9 in June 2021. Compared to July 2021, sentiment declined by 23.5% on a year-over-year basis. Today’s report adds to the slew of worsening economic data that has been coming out in recent months and does little to calm recession fears.
Stocks are in the Red to Start Tuesday’s Trading Session
Last Updated 10:00AM EST
Stock indices are in the red 30 minutes into today’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%, 0.6%, and 0.9%, respectively. This is the result of Walmart’s earnings report, where it warned that inflation was impacting its profits.
Not surprisingly, the consumer discretionary sector (XLY) is the laggard so far, as it is down 2.1%. Conversely, the energy sector (XLE) is the session’s leader, with a gain of 0.9%.
WTI crude oil remains below $100 per barrel, as demand for gasoline is lower than pre-pandemic levels, which is the result of high prices at the pump. However, physical markets remain undersupplied. As a result, the price is hovering around the mid-$97 per barrel range, up roughly 1.2% from the previous close.
Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.73%. This represents a decrease of seven basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -27 basis points.
Pre-Market Update
U.S. stock futures moved lower early Tuesday morning as investors digested recent earnings reports and dismal company outlooks, and braced themselves for more earnings releases from major blue-chip firms.
Moreover, Walmart’s (WMT) profit guidance cut also affected market sentiments in the pre-market hours. This drove investors away in flocks from retail stocks, leading to a drop in peer companies such as Amazon (AMZN), Target (TGT), Macy’s (M), Dollar General (DG), and Costco (COST).
Futures on the Dow Jones Industrial Average (DJIA) lost 0.36%, while those on the S&P 500 (SPX) moved 0.35% lower, as of 8.08 a.m. EST, Tuesday. Meanwhile, the Nasdaq 100 (NDX) futures retracted by 0.43%.
Late on Monday Walmart announced that inflated food prices have prompted the company to trim its profit expectations for 2022. Moreover, the company also warned of lower general merchandise spending by consumers as a result of inflation.
At market close on Monday, the S&P 500 advanced 0.13%, and the Dow climbed 0.28%. However, the tech-heavy Nasdaq 100 slid 0.55%.
This week holds major earnings and economic data, including the second quarter GDP report and earnings from Amazon, Microsoft (MSFT), Apple (AAPL), and other stalwarts. Also, the latest consumer confidence report and new home sales data are expected to be out later on Tuesday.
Most importantly, the Federal Reserve is slated to make another round of interest rate hikes this week.
