What you need to know…
The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -2.01%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -3.09%.
Stocks on Tuesday erased an early advance, trended lower the rest of the day, and closed sharply lower. Stocks gave up their gains after U.S. Jun consumer confidence fell more than expected to a 16-month low. Stock indexes extended their losses Tuesday afternoon after technology stocks sold off.
Stock indexes Tuesday morning initially moved moderately higher, with the S&P 500 and Dow Jones Industrials posting 2-week highs on optimism that Chinese growth will pick up after China eased some pandemic restrictions. Also, Federal Reserve officials played down the risk that the U.S. economy will fall into recession after New York Fed President Williams and San Francisco Fed President Daly said the U.S. economy remains strong.
U.S. stock indexes had early carry-over support from a rally in China’s Shanghai Composite to a 3-1/2 month high Tuesday. The action by China to cut its mandatory quarantine period to 10 days from three weeks for inbound travelers should boost economic activity and ease supply-chain turmoil in the country, which is favorable for global growth.
U.S. Apr S&P CoreLogic composite-20 home price index unexpected rose at a record +21.23% y/y, stronger than expectations of a decline to +21.05% y/y.
The Conference Board U.S. Jun consumer confidence index fell -4.5 to a 16-month low of 98.7, weaker than expectations of 100.0.
The U.S. Jun Richmond Fed manufacturing survey unexpectedly fell -10 to a 2-year low of -19, weaker than expectations of an increase to -7.
New York Fed President Williams said the U.S. economy is strong, and a recession is not in his base case. He added that the Fed has a path to bring inflation down, and he sees the Fed hiking to somewhat restrictive rates in 2023.
San Francisco Fed President Daly played down the risk of a U.S. recession, saying, "I wouldn't be surprised, and it's actually in my forecast, that growth will slip below 2%, but it won't actually pivot into negative territory."
Today’s stock movers…
Technology stocks were slammed Tuesday, and their losses weighed on the overall market. Datadog (DDOG) closed down by more than -7% to lead losers in the Nasdaq 100. Also, Advanced Micro Devices (AMD) closed down by more than -6%, and Amazon.com (AMZN), Nvidia (NVDA), Tesla (TSLA), and Meta Platforms (META) closed down by more than -5%. In addition, Adobe (ADBE), Marvell Technology (MRVL), Atlassian Corp Plc (TEAM), Intuit (INTU), and Okta (OKTA) closed down by more than -4%.
Etsy (ETSY) closed down more than -8% Tuesday to lead losers in the S&P 500 after Guggenheim cut its price target on the stock to $101 from $175, saying it sees signs of weakness in gross merchandise sales trends.
Nike (NKE) closed down nearly -7% Tuesday to lead losers in the Dow Jones Industrials after it said full-year gross margins would be flat to down 50 basis points due to weak sales in China.
Qualcomm (QCOM) closed up more than +3% to lead gainers in the Nasdaq 100 after Bank of America added the stock to its U.S. 1 list, a collection of its best investment ideas. Qualcomm added to its gains Tuesday when TF Securities said its latest survey indicated that Qualcomm would remain the exclusive supplier of 5G chips for Apple.
Energy stocks and energy service providers rallied Tuesday as crude prices climbed more than +2% to a 1-week high. Hess Corp (HES) closed up more than +5% to lead gainers in the S&P 500. Also, Occidental Petroleum (OXY), Diamondback Energy (FANG), and Marathon Oil (MRO) closed up more than +4%. In addition, Valero Energy (VLO), ConocoPhillips (COP), Haliburton (HAL), and Schlumberger (SLB) closed up more than +3%. Chevron (CVX) closed up +1.6% to lead gainers in the Dow Jones Industrials.
U.S. casino stocks with exposure to Macau moved higher Tuesday after China reduced quarantine times for inbound travelers by half. Las Vegas Sands (LVS) closed up by more than +4%, and Wynn Resorts (WYNN) closed up by more than +3%.
Across the markets…
Sep 10-year T-notes (ZNU22) on Tuesday closed down by -3.5 ticks, and the 10-year T-note yield fell -0.4 bp to 3.196%. T-notes were weighed down Tuesday from weakness in European government bond markets and hawkish Fed comments. However, T-notes recovered most of their losses on mixed U.S. economic data and a slump in stocks, which boosted the safe-haven demand for government debt. Also, strong demand for the Treasury’s $40 billion 7-year T-note auction sparked afternoon short-covering in T-notes. The 7-year auction had a 2.48 bid-to-cover ratio, above the 10-auction average of 2.37, a sign of strong demand.
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