Stocks Slide as Strong U.S. Economic News Keeps the Fed Aggressive

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -01610, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.96%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.13%. 

Stocks on Tuesday fell for the third consecutive session, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new 1-month lows.  Better-than-expected U.S. economic reports Tuesday on July JOLTS job openings and Aug consumer confidence, along with several hawkish Fed comments, pushed up T-note yields and weighed on stocks.  As a result, the 10-year T-note yield rose to a new 2-month high Tuesday of 3.149%.  

Stocks were also under pressure Tuesday after Credit Suisse recommended that investors go underweight global equities as the argument for an early dovish pivot by the Fed and other major central banks are now "clearly out the window."  Markets are now confronted with slowing growth, rising recession risks, and elevated inflation, and "the next few months are thus likely going to be painful."   

The U.S. June S&P CoreLogic composite-20 home price index rose +0.44% m/m and +18.65% y/y, weaker than expectations of +0.90% m/m and +19.20% y/y.

The Conference Board U.S. Aug consumer confidence index rose +7.9 to 103.2, stronger than expectations of 98.0.

U.S. July JOLTS job openings unexpectedly rose +199,000 to 11.239 million, showing a stronger labor market than expectations of a decline to 10.375 million.

New York Fed President Williams said, "we need to have somewhat restrictive policy to slow demand, and we're not there yet."  He added that the Fed will need to hold interest rates in restrictive territory for "some time," saying this meant through 2023. 

Atlanta Fed President Bostic said the Fed can't afford to stop raising interest rates before bringing inflation back to the Fed's target, even if the result is higher unemployment for a time.

Richmond Fed President Barkin said interest rates will need to be restrictive to control inflation, and "the Fed is committed to returning inflation to its 2% target, and it will do what it takes to get there."

Today’s stock movers…

A more than -5% slump in WTI crude prices Tuesday undercut energy stocks and energy service providers.  As a result, Haliburton (HAL), Occidental Petroleum (OXY), Marathon Oil (MRO), Schlumberger (SLB), Valero Energy (VLO), Devon Energy (DVN), and Baker Hughes (BKR) closed down by more than -4%.  Also, Exxon Mobil (XOM), Phillips 66 (PSX), Diamondback Energy (FANG), and Marathon Petroleum(MPC) closed down by more than -3%. 

Technology stocks were under pressure Tuesday from rising T-note yields as the 10-year T-note yield climbed to a new 2-month high of 3.149%.  Tesla (TSLA), Nvidia (NVDA), Intel (INTC), Applied Materials (AMAT), and Marvel Technology (MRVL) closed down by more than -2%. Also, Apple (AAPL), Broadcom 

(AVGO), Advanced Micro Devices (AMD), Meta Platforms (META), Qualcomm (QCOM), Micron Technology (MU), and Analog Devices (ADI) closed down more than -1%. 

Lucid Group (LCID) closed down more than -6% Tuesday after filing for the potential sale of up to $8 billion of mixed securities, which may include common stock, by the company.

Baidu (BIDU) closed down more than -6% Tuesday to lead losers in the Nasdaq 100 after the company reported Q2 earnings results slightly better than expected but warned of “a challenging macro environment.”

Workday (WDAY) closed up more than +2% to lead gainers in the Nasdaq 100 as 11 analysts have changed their price targets on the stock by an average of +6.1% since the company reported quarterly earnings last Thursday.

Best Buy (BBY) closed up more than +1% Tuesday after reporting Q2 adjusted EPS of $1.54, better than the consensus of $1.35. 

Across the markets…

Sep 10-year T-notes (ZNU22) on Tuesday closed down -1 tick, and the 10-year T-note yield rose +0.4 bp to 3.106%.  Sep T-notes Tuesday slipped to a new 2-month low, and the 10-year T-note yield rose to a 2-month high of 3.149%.  Stronger-than-expected U.S. economic news weighed on T-note prices Tuesday, along with several hawkish comments.  However, a decline in inflation expectations limits losses in T-note prices after the 10-year breakeven inflation rate fell to a 1-week low Tuesday at 2.538%. 

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