What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -1.81%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.85%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.12%.
Stock indexes this morning are moving moderately lower on recession fears. Concern that a tighter Fed policy will push the economy into recession is undercutting stock indexes today. Stocks tied to economic activity, such as automakers and semiconductor makers, are leading losses in the overall market.
U.S. stock indexes initially moved higher in overnight trade on optimism about U.S.-China talks aimed at tariff reductions. U.S. and Chinese officials discussed U.S. economic sanctions and tariffs today amid reports the Biden administration will soon roll back some of the trade restrictions imposed by fomer President Trump. According to a statement today from China’s Ministry of Commerce, the two sides discussed economic policy and stabilizing global supply chains, and the talks were pragmatic and constructive.
Morgan Stanley said the U.S. economy is in the middle of a slowdown that's turning out to be worse than expected amid the war in Ukraine and China's Covid Zero policy.
Today’s U.S. economic data was better than expected and supportive for stocks after May factory orders rose +1.6% m/m, stronger than expectations of +0.5% m/m.
The Reserve Bank of Australia (RBA) today raised its key benchmark interest rate by 50 bp to 1.35%, as expected. The Australian central bank is among the more than 80 central banks to have raised interest rates this year.
Today’s stock movers…
Semiconductor stocks are falling today for a second sessson on negative carry-over from last Friday when Micron Technology issued a weak forecast for the current quarter due to lower demand for phones and computers. ASML Holding NV (ASML) is down more than -6% to lead losers in the Nasdaq 100. Also, Lam Research (LRCX) is down more than -4%. In addition, NXP Semiconductor NV (NXPI), Microchip Technology (MCHP), Advanced Micro Devices (AMD), Texas Instruments (TXN), and Applied Materials (AMAT) are down more than -2%.
Automakers are falling today and weighing on the overall market after Q2 sale numbers from U.S. automakers disappointed. Stellantis NV (STLA) is down more than -6%. Also, Ford Motor (F) is down more than -5%. In addition, General Motors (GM) and Tesla (TSLA) are down more than -4%.
Cruise line operators are slumping today on recession concerns. Carnival (CCL) is down more than -7%, and Royal Caribbean Cruises (RCL) is down more than -6%. Norwegian Cruise Line Holdings (NCLH) is down more than -5%.
Freeport-McMoRan (FCX) is down more than -8% today to lead losers in the S&P 500 after copper prices tumbled to a 1-1/2 year low on concern a slowdown in the global economy will undercut demand for industrial metals.
HP Inc (HPQ) is down more than -4% today after Evercore ISI downgraded the stock to in-line from outperform, saying that “headwinds could get more severe.”
Moderna (MRNA) is up more than +3% today to lead gainers in the S&P 500 and Nasdaq 100 after Switzerland’s Federal Office of Public Health recommended that people over 80 have a further Coid booster vaccination and that in the fall of 2022, it will recommend all people receive Covid booster shots.
Across the markets…
Sep 10-year T-notes (ZNU22) this morning are up +21 ticks, and the 10-year T-note yield is down -7.1 bp at 2.809%. Sep T-notes this morning are moderately higher and just below last Friday’s 1-month high. A slump in stocks today has boosted the safe-haven demand for T-notes. Also, a rally in European government bonds is providing carry-over support to T-note prices.
The dollar index (DXY00) this morning is up +1.33%. The dollar index this morning surged to a 20-year high. Concern the global economy may fall into recession has boosted safe-haven demand for the dollar. Also, a slump in stocks today has sparked liquidity demand for the dollar. In addition, weakness in EUR/USD, which fell to a 20-year low today, is supportive of the dollar.
EUR/USD (^EURUSD) is down -1.45% today. EUR/USD plummeted to a 20-year low today on concern the ECB will be slow to tighten monetary policy, which has weakened the euro’s interest rate differentials. EUR/USD is moving lower today despite better-than-expected Eurozone economic data on French May manufacturing production and Eurozone Jun S&P composite PMI.
The Eurozone Jun S&P composite PMI was revised slightly higher by +0.1 to 52.0 from the previously reported 51.9.
France May manufacturing production rose +0.8% m/m, stronger than expectations of +0.3% m/m.
USD/JPY (^USDJPY) today is up +0.12%. USD/JPY today is slightly higher as strength in the dollar is weighing on the yen. The yen is also under pressure today on weaker-than-expected Japanese economic data on wage growth and services activity that may prompt the BOJ to maintain QE and record low interest rates, bearish factors for the yen.
The Japan Jun Jibun Bank services PMI was revised downward by -0.2 to 54.0 from the originally reported 54.2.
Japan May real cash earnings fell -1.8% y/y, weaker than expectations of -1.6% y/y and the biggest decline in 1-3/4 years.
August gold (GCQ22) this morning is down -12.0 (-0.67%), and September silver (SIU22) is down -0.177 (-0.87%). Precious metals today are moderately lower, although they remain just above last Friday’s significant lows, where gold dropped to a 5-month low and silver fell to a 23-month low. Today's rally in the dollar index to a 20-year high is bearish for metals prices. Silver is also under pressure from a plunge in copper prices to a 1-1/2 year low today on concern a slowdown in the global economy will hurt demand for industrial metals. However, lower global bond yields today are limiting losses in gold prices.
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