tiprankstipranks
Stock Market Today – Tuesday, Aug 09: What You Need to Know
Market News

Stock Market Today – Tuesday, Aug 09: What You Need to Know

Story Highlights

Stocks finished Tuesday’s trading session in the red as worsening company outlooks and higher costs of living are weighing down investor sentiment. In addition, small business sentiment continues to remain lower than average.

Stocks Finish Tuesday’s Session in Negative Territory

Last Updated 4:20 PM EST

Stock indices finished today’s trading session in the red. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 decreased 0.18%, 0.42%, and 1.15%, respectively.

The consumer discretionary sector was the session’s laggard, as it fell by 1.59%. Conversely, the energy sector was the session’s leader, with a gain of 1.76%. In addition, WTI crude oil lost 0.16%, reaching $90.54 per barrel.

Furthermore, the U.S. 10-Year Treasury yield increased to 2.78%, an increase of 6.6 basis points. Similarly, the Two-Year Treasury yield also increased, hovering around 3.26%. This brings the spread between them to -48 basis points. The negative spread indicates that investors still have fears of a recession.

Compared to yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 3.75% to 4% increased to 26.6%, which is up from yesterday’s expectations of 20.6%.

In addition, the market is now also assigning a 46% probability to a range of 3.5% to 3.75%. For reference, investors had assigned a 47.4% chance yesterday.

Prices at the Pump Continue to Decline

Last Updated 3:00PM EST

Stock indices are in the red heading into the final hour of today’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 0.2%, 0.5%, and 1.1%, respectively.

WTI crude oil is currently hovering around $90.60 per barrel, as it trades off its session high of $92.62 per barrel. The price has pulled back considerably from last week’s high of $98.63 per barrel.

Consumers will be happy to see that the commodity’s continued downtrend has led to lower gas prices across the country. The national average for regular gas was last $4.033 per gallon, down from yesterday’s reading of $4.059. This is significantly lower than the all-time high of $5.016 per gallon on June 14.

The highest prices can be found in California, where prices are substantially higher than the national average, at $5.42 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $3.535 per gallon.

It’s likely that this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation. However, higher rates will destroy demand throughout the whole economy.

Small Business Optimism Remains Below Its 48-Year Average

Last Updated 12:10PM EST

Equity markets are in the red halfway into the trading session. As of 12:10 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.1%, 0.5%, and 1.4%, respectively.

On Tuesday, the National Federation of Independent Business (NFIB) released its Small Business Optimism Index for the month of July. As the name suggests, it is a survey that measures the level of optimism among small businesses.

In July, the index rose slightly by 0.4 points to a level of 89.9. Nevertheless, it has remained below its 48-year average of 98 for the last six months. In addition, 37% of small business owners cited inflation as their single largest concern related to operations.

As a result, 37% of businesses in the survey said they plan to raise prices, while only 29% of businesses expect higher sales. Of the small businesses that saw lower profits, 40% attributed the decline to higher material costs, while 10% pointed to labor costs. Weaker sales made up 17% of the blame.

This data highlights that consumer spending is still strong since 83% of respondents who saw a decline in profits didn’t blame weaker sales. However, it demonstrates the impact that inflation has on profitability, as the higher revenue figures actually led to operating deleverage, meaning that earnings didn’t grow faster than sales.

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 0.2%, 0.5%, and 1.4%, respectively.

The consumer discretionary sector (XLY) is the laggard so far, as it is down 1.8%. Conversely, the energy sector (XLE) is the session’s leader, with a gain of 2.5%.

WTI crude oil remains below $100 per barrel as demand for gasoline remains lower than pre-pandemic levels, which is the result of high prices at the pump. In addition, there are talks of reviving a nuclear deal with Iran, which would allow it to increase its oil exports. As a result, the price is hovering around the high-$91 per barrel range.

Meanwhile, bond yields are higher, as the U.S. 10-Year Treasury yield is now hovering around 2.81%. This represents an increase of more than four basis points from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 3.27%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -46 basis points.

Pre-Market Update

U.S. equity futures moved below parity early on Tuesday morning ahead of key earnings results and the much-awaited inflation data, all set to be released this week.

Futures on the Dow Jones Industrial Average (DJIA) lost 0.2%, while those on the S&P 500 (SPX) inched 0.19% lower, as of 6.39 a.m. EST, Tuesday. Meanwhile, the Nasdaq 100 (NDX) futures retracted by 0.55%.

At market close on Monday, the S&P 500 and the Nasdaq 100 shed 0.12% and 0.37%, respectively. Meanwhile, the Dow concluded the regular trading session with 0.09% gains.

On The Earnings Front

On Monday, Nvidia (NVDA), a key player in the semiconductor industry, significantly lowered its Q2 guidance in a preliminary quarterly result announcement. This further concerned investors, who were already disappointed with the results of semiconductor majors Intel (INTC) and Micron (MU), as well as a dismal outlook from Advanced Micro (AMD). This weighed heavy on the overnight trading on Monday.

Again, Novavax (NVAX) nosedived 32% in the after-hour trading Monday, after lowering its full-year revenue guidance based on waning demand for its Covid vaccines.

Consumer lending company Upstart’s (UPST) lower-than-estimated Q2 results also led to a 10% decline in its share prices in Monday’s extended trading.

Anxious investors are waiting for Tuesday’s batch of earnings results from Workhorse (WKHS), Capri Holdings (CPRI), and Ralph Lauren (RL) before the market opens, and Coinbase (COIN), Spirit Airlines (SAVE), Roblox (RBLX), Sweetgreen (SG), and EVgo (EVGO) after the bell.

Economic Updates and Outlook

The weak revenues and revenue guidance from Nvidia have formed a dark cloud over the prospects of other semiconductor players.

However, last Friday’s revelation of a surprisingly strong job market in July has let off some steam. Investors are now more at ease, knowing that the economy can handle more interest rate hikes that are needed to curb inflation.

On that note, Wednesday will bring to us July’s consumer price index (CPI) reading, which will show us whether the monetary tightening moves were able to have any effect on inflation. The data will also give more insight into the possible direction that the Federal Reserve might take in the next meeting round.

Dow Jones survey shows that most economists expect the headline CPI (including energy and food prices) to have cooled to 8.7% in July, down from 9.1% recorded June.

Fed governor Michelle Bowman recently reinforced the possibility of more hikes of as much as 75 basis points until inflation shows signs of sustained and significant cooling.

Meanwhile, the bill for climate and healthcare was passed by the Senate into the Inflation Reduction Act. Importantly, the auto sector, particularly the electric vehicle (EV) industry as well as its related industries, are expected to benefit from this act, which has set aside a $15-billion-dollar budget for them. This might give an impetus to the stock prices of automobile stocks.

Disclosure

Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles