Stocks Finish Tuesday’s Session in Negative Territory
Last Updated 4:15PM EST
Stock indices finished Tuesday’s trading session in the red. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 decreased 0.96%, 1.1%, and 1.13%, 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 August, consumer confidence came in at 103.2, which was better than expectations of 97.9. This breaks a three-month decline, which fell as low as 95.3 in July. For reference, last month’s reading was lower than what was seen in June 2020, when COVID-19 fears were weighing down on sentiment.
Therefore, this month’s result is a positive development. The increase in consumer confidence is likely attributable to easing inflation, as energy and food prices have come down a bit.
Nonetheless, it’s worth noting that consumer confidence has been on an overall downtrend since its post-pandemic peak of 128.9 in June 2021. Compared to August 2021, sentiment declined by 10.4% on a year-over-year basis.
Home Prices Increased in June
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 1.1%, 1.3%, and 1.5%, respectively.
The energy sector is the laggard so far, as it is down 3.7%. Conversely, the financial sector is the session’s leader, with a loss 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 18.6% in June, lower than the expected 19.5%. This is lower than last month’s reading of 20.5%. In addition, prices increased 0.4% on a month-over-month basis compared to 1.5% in May, decelerating for the third month in a row.
However, it’s important for investors to remember that this report is for June, 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.
Tuesday’s JOLTS Report Comes in Better Than Expected
Last Updated 12:00PM EST
Stocks are negative halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.8%, 0.9%, and 1.1%, respectively.
The energy sector is the laggard so far, as it is down 3.3%. Conversely, the financials sector (XLF) is the session’s leader, with a loss of 0.2%.
In addition, recession fears continue to put pressure on WTI crude oil, as it has fallen to around $91.50 per barrel, representing a decline of more than 5% from its previous close.
On Tuesday, the Bureau of Labor Statistics released its JOLTS Job Openings report, which helps measure job vacancies in the U.S. The number came in at 11.239 million job openings for July, above the expected 10.475 million.
Although lower than the peak of 11.855 million, job openings are still near their highs. In fact, today’s report breaks a three-month slide, and it will be interesting to see if this trend continues as rates continue to rise while growth slows down.
In addition, it’s important to remember that this data is for July, thus, making it a lagging indicator. Since then, many companies have announced that they will reduce their workforce in order to cut costs.
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 0.03%, 0.1%, and 0.1%, respectively.
The energy sector (XLE) is the laggard so far, as it is down 2.9%. Conversely, the consumer discretionary sector (XLY) is the session’s leader, with a gain of 0.2%.
WTI crude oil remains below $100 per barrel as fears of aggressive rate hikes are raising concerns about an economic slowdown. As a result, the price is hovering around the high-$92 per barrel range, a decrease of more than 4%.
Meanwhile, the U.S. 10-Year Treasury yield is lower, as it is now hovering around 3.08%. This represents a decrease of more than two basis points from the previous close.
On the other hand, opposite movements can be seen with the Two-Year yield, which is now at 3.47%. As a result, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative and widening, currently sitting at -39 basis points.
Pre-Market Update
Stock futures rose early Tuesday morning as investors looked for a possible bottoming out of the market dip that was triggered by the Fed’s comments last Friday.
Futures on the Dow Jones Industrial Average (DJIA) inched 0.68% higher, while those on the S&P 500 (SPX) gained 0.84%, as of 5.52 a.m. EST, Tuesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 1.10%.
The futures movements came as a breather after the major indexes suffered two consecutive days of decline. At the end of regular trading, Monday, the S&P 500, the Dow, and the Nasdaq 100 sank 0.67%, 0.57%, and 0.96%, respectively.
Stock and Bond Prices Under Pressure
In the annual economic symposium at Jackson Hall last week, Fed Chair Jerome Powell reinstated that more systematic interest rate hikes are on the way in the forthcoming months, irrespective of the heightened risk of a recession.
Meanwhile, the major update also led to a value erosion in bond prices, which pushed up the yields. The yield on the two-year Treasury bill was 3.427% on Monday, up from Friday’s 3.391%. This put further pressure on stock prices, which move inversely with bond yields.
Increased Short-Selling Bolsters Speculation of Further Market Decline
Importantly, despite a possible short rally prompted by bottom-fishing investors, the markets are largely expected to be volatile in the coming months.
This speculation was further bolstered by the fact that net short positions against S&P 500 futures have been climbing over the past couple of months, reaching the highest levels in two years. When a short position in a security rises, it reflects traders’ expectations that the price of the security will fall further in the short run. Traders then sell off the security, intending to buy it again when the prices drop further.
More Data on The Way
Tuesday is an action-packed day of several economic data releases. Investors await the home price index for June by the Federal Housing Finance Agency later on Tuesday. Moreover, data on July’s job openings will also be released by the Bureau of Labor Statistics on Tuesday. These two updates will give investors a further look into the state of the economy.
Also on Tuesday, the report on August’s consumer confidence survey by the Conference Board will reveal how consumers are dealing with elevated prices and borrowing costs.
Moreover, August’s consumer price index (CPI) reading, the most important economic data that will dictate the course of the Fed’s September meeting, will be out on September 13. The data will determine how far the Fed might go with the next round of interest rate hikes.
