Economic Contraction

US STOCKS-Wall Street falls at close as concerns rise ahead of CPI report

Wall Street ended in negative territory on Tuesday as growing signs of recession kept buyers away from the stock market ahead of inflation data. While the three major U.S. stock indexes oscillated between modest gains and losses earlier in the session, they fell sharply late in the day ahead of Wednesday’s Labor Department consumer price report, with big bank earnings looming later in the week.

“(Investors are waiting) to know what’s going on with CPI and earnings,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company, in Milwaukee, Wisconsin. “For several months, we have oscillated between fears of inflation and fears of recession, almost daily. “We really confused the investors who chose to go on a buyers’ strike,” Schutte added. “I don’t hear a lot of people say ‘buy the dip’.”

While the CPI report is expected to show inflation accelerating in June, the so-called core CPI, which strips out volatility in food and energy prices, appears to offer further confirmation that inflation has peaked, which could potentially convince the Federal Reserve to ease on policy tightening in the fall. Paul Kim, managing director of Simplify ETFs in New York, expects the year-over-year higher CPI “to be in the high eight or potentially even nine percent range, and with inflation as well. high, the Fed has only one thing on its mind.”

Worries that the Fed’s overly aggressive measures to suppress high inflation for decades could push the economy to the brink of recession have been heightened by the sharper reversal in 2-year and 10-year Treasury yields years since at least March 2010, a potential signal of near-term risk and economic contraction. The market expects the central bank to raise the target federal funds rate by 75 basis points after its policy meeting in July, which would mark its third consecutive interest rate hike.

The Dow Jones Industrial Average fell 192.51 points, or 0.62%, to 30,981.33, the S&P 500 lost 35.63 points, or 0.92%, to 3,818.8 and the Nasdaq Composite fell 107.87 points, or 0.95%, to 11,264.73. All 11 major sectors of the S&P 500 fell, with energy stocks, weighed down by falling crude prices, suffering the largest percentage loss.

The second quarter reporting season will be in full swing later in the week as JPMorgan Chase & Co, Morgan Stanley, Citigroup and Wells Fargo & Co release results. On Friday, analysts saw S&P overall annual earnings growth of 5.7% for the April-June period, down from the 6.8% forecast at the start of the quarter, according to Refinitiv.

PepsiCo got the ball rolling this week by beating its quarterly earnings estimates and signaling it may raise prices amid resilient demand. Shares of Boeing Co jumped 7.4% after the maker’s aircraft deliveries in June hit the highest monthly level since March 2019.

This news, along with falling energy prices, helped the S&P 1500 Air Lines Index rise 6.1%. Clothing retailer Gap Inc fell 5.0% after news of the departure of its CEO and the fact that margins would remain under pressure in the second quarter due to input costs.

Software provider Service Now plunged 12.7% after its CEO’s remarks on macroeconomic headwinds and currency pressures. Other software companies, including Salesforce.com, Paycom Software, Intuit and Microsoft, were also down. Falling issues outnumbered rising ones on the NYSE by a ratio of 1.37 to 1; on the Nasdaq, a ratio of 1.19 to 1 favored the decliners.

The S&P 500 posted a new 52-week high and 30 new lows; the Nasdaq Composite recorded 13 new highs and 145 new lows. Volume on U.S. exchanges was 9.86 billion shares, compared to an average of 12.79 billion over the past 20 trading days.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)