As investors returned from their July 4th vacation, the stock market dipped as investors remained concerned about the possibility of a U.S. recession.
Futures for the DJIA +1.05% are down 194 points, or 0.6 percent, while those for the S&P 500SPX +1.06% and Nasdaq CompositeCOMP +0.90% are down 0.7 percent and 0.6 percent, respectively.
The FTSE 100 in London fell by 0.9%.
As central banks like the Federal Reserve attempt to combat decades-long high inflation by increasing interest rates, there is growing concern that this might precipitate a recession by reducing consumer demand. It’s a busy week for economic data, including Friday’s nonfarm payrolls report in the United States and the Federal Reserve’s minutes from its June meeting, which will be extensively scrutinized by investors.
While the U.S. holiday has brought a respite to markets, Jim Reid, a strategist at Deutsche Bank, says the market is still unsure of how to price fixed income in the event of a recession.
When it comes to second-quarter GDP, the Atlanta Fed’s GDPNow tool suggests a 0.2% fall, which would be the second quarter of decline and match the criteria of a recession. After a tumultuous night, the two-year Treasury yield reached 2.95 percent and briefly overtook the 10-year. Known as a “yield curve inversion,” it’s regarded as a forerunner to a recession, although the date is unclear. Ian Lyngen, a BMO Capital Markets analyst, says this is the third such inversion since January 1. “2s/10s reversed once more overnight.” This is the third time this cycle has repeated itself, and we expect this episode to be more profound and long-lasting, he adds.
Despite the stock market’s decline, China’s Vice-Premier Liu and U.S. Treasury Secretary Janet Yellen had a “productive” phone chat in which they agreed to improve macro-policy coordination.
Following a Wall Street Journal story on intentions to ease duties on select Chinese imports and establish a structure for importers to obtain tariff exemptions, expectations were also building that the United States would delay taxes on some Chinese imports.
Jeffrey Halley, an analyst at broker Oanda, says the market is rife with speculation that US President Biden may slash tariffs on a swath of Chinese commodities this week to reduce inflation.
Dollar strength has likely contributed to the recent rise in stock prices. The U.S. Dollar Index, which measures the dollar against a basket of six rivals, gained 1% to 106, its highest level in 20 years and up from 96 at the beginning of 2022. For stock market investors, this isn’t good news. International sales of American multinational corporations are devalued due to the high value of the dollar.
The euro, which fell 1.2 percent to $1.00 on Tuesday, was one of the largest losers against the dollar. Fears of a recession are growing in Europe, where the Russian invasion of Ukraine has resulted in very high energy price inflation, particularly for natural gas. As a result, the euro has been under pressure as a result of concerns over rising gaps between European Union bond rates.
Analyst Neil Wilson of broker Markets.com says the euro is in danger since the ECB is so far from its goal and now faces even greater difficulty in terms of fragmentation. Alternatively, if the European Central Bank does not act quickly, we may return to parity. It’s crucial to note that the dollar is being bid across the board at these levels.
Here are today’s top-moving stocks, as compiled by MarketWatch:
BUD fell 2% in the U.S. premarket despite Citi’s upgrade to “Buy” and forecasts from Deutsche Bank analysts that Anheuser-Busch InBev will have a strong quarter with double-digit profits growth.
After suing BioNTech (BNTX) for patent infringement, CureVac (CVAC) shares rose by 1%. BioNTech shares have declined 0.9 percent in the last trading session.
HP HPQ –2.78 percent (HP Q) is down 1.8% after Evercore ISI lowered its rating on the stock from Outperform to In-Line.
Stock in Kohl’s (KSS) fell by 1% after a 20% drop on Friday after-sales discussions came to an end.
Despite signing a five-year deal with Ice Norway, Nokia’s share price has dropped 2.8%.
SAP (SAP) fell 3% despite analysts at Berenberg recommending a Buy recommendation for the European software company, citing a surge in demand for its cloud-based products.
Despite Citi’s downgrade to Neutral from Buy, Sony (NASDAQ: SONY) is up 1%.
Since Tesla reported June deliveries over the weekend, the stock has slid 0.9 percent.
DZ Bank downgraded Texas Instruments (TXN) from Buy to Hold, resulting in a 1.7% decline in share price.