Markets braced for improvement in consumer inflation, could be turning point for bonds
Treasury yields were higher ahead of the release of July's consumer price index Thursday.
The report is expected to show that headline CPI was at a year-over-year pace of 8.7% in July, down from 9.1% in June, according to Dow Jones. Traders said for the market to view it positively, inflation would have to be in line with expectations or even lower.
Ahead of the report, the spread between the 2-year note yield and 10-year note yield continued to widen, with the 2-year yield rising further above the 10-year. The fact the 2-year is higher means the yield curve is inverted, and that is sometimes a signal of recession.
Andy Brenner of National Alliance said CPI could be a turning point for the market. "If we get a good CPI report, which is what a lot of people are hoping for, I think you can switch the yield curve around and you can shift the odds of the Fed to be less aggressive from more aggressive," said Brenner. "On the other hand, if it's a bad number, and it's still 9%, or it's still high month-over-month, the markets going to try to lock in 75 (basis points) for September."
The fed funds futures has been pricing in high odds of another three-quarter point, or 75 basis point hike, for September. Some economists, however, expect the hike to be a half point.
Nasdaq still leads to the downside as final hour begins
With one hour left in Tuesday's trading session, the Nasdaq Composite continues to lead the major averages to the downside. The tech-heavy index is down by 1.2%, while the S&P 500 is down about 0.5%. The Dow has slipped 60 points, or 0.2%.
Small caps have been hit particularly hard today. The Russell 2000 is down 1.7%.
Dow near session lows
After trading near the flatline for much of the day, the Dow has fallen more than 100 points in afternoon trading.
Salesforce is the worst performer in the 30-stock average, falling 4.5%. Apparel stock Nike has slid 3.6%.
Home Depot and chipmaker Intel are also weighing on the Dow, falling more than 2% each.
Investors should consider getting defensive ahead of CPI report, strategist says
The rally off the June lows for stocks means that some investors may be looking to hedge their bets ahead of Wednesday's key CPI report.
Mike Reynolds, vice president of investment strategy at Glenmede, said his firm believes the market is underestimating the Fed's rate hike path and that investors should consider taking some risk off the table.
"For those that maybe missed out on an opportunity to de-risk their portfolios a few months ago, with the rally we've seen, maybe this is the opportunity to get that positioning in place. Particularly ahead of such a big report tomorrow, where the market is going to be very sensitive to that output," Reynolds said.
— Jesse Pound
Amazon's latest deals make its acquisition strategy clear, says DA Davidson
Put another way, Amazon has already started building those businesses within its own company first.
Both deals are also under $10 billion, which suggests Amazon is confident deals at those levels will be approved by the government, analyst Tom Forte wrote in a note.
—By Michelle Fox
Bitcoin struggles to break out above $24,000
Bitcoin was trading about 3% lower midday at about $23,000, and while that level is a welcome lift from its summer low, investors are still hoping to see it hold a meaningful breakout above $24,000.
The cryptocurrency has been working its way higher over the past few weeks from its June low of about $18,000, which many are speculating could be a bottom – including JPMorgan, which said this week that cryptocurrencies "have found a floor."
Bitcoin rose above $24,000 twice in late July and briefly touched it again this Monday. It remains about 66% below its all-time high of $68,990.90.
— Tanaya Macheel
Raymond James downgrades Micron to outperform
Raymond James downgraded shares of Micron to outperform from strong buy, and trimmed its price target, following Tuesday's revenue warning from the chipmaker.
"While we continue to believe MU will benefit from significant secular trends driving long-term demand — while also enjoying technology and cost advantages over peers — we feel near-term news is likely to work against shares into FY23, limiting upside," analyst Melissa Fairbanks wrote in a Tuesday note.
The analyst cut the price target to $65, down from $72, implying roughly 12% upside from where shares were last trading at $57.95.
Shares are down more than 5% in midday trading.
— Sarah Min
June wasn't the market low, BofA says
It's probably too early to call the June dip in stocks the market low, signaling stocks could slip even further, according to Bank of America.
Analysts led by Jared Woodard see a few reasons that markets haven't yet bottomed out. Those include looser financial conditions, a lack of bull market indicators flashing that June is the bottom of the cycle, and strength in U.S. retail investors.
— Carmen Reinicke
Market breadth narrows as stocks fall
After Wall Street enjoyed a fairly broad rally in recent weeks, Tuesday's decline is now taking a bite out of several areas of the market.
Declining stocks are slightly outpacing advancers in the S&P 500, and that gap stretches to nearly 2-to-1 when looking at the NYSE Composite, according to FactSet.
While tech remains a drag on the market, the consumer discretionary, materials and industrials sectors are struggling on Tuesday.
— Jesse Pound
A measure of short-squeeze activity is highest since 2021 meme madness
The GS Most Short Index has been on a tear, surging more than 18% over the last 5 days. With those gains, the index – a key measure of stocks that investors are shorting, or betting against – is at its highest level since January 2021, the height of meme stock madness, when meme stocks such as GameStop and AMC Entertainment surged.
"Prior to that [the index was] only higher [in] the last the five-years+ coming off the Covid-bottom in March/ April 2020," wrote analyst Jonathan Krinsky of BTIG in a Monday note. He added that the gains feel somewhat forced, but that he respects the price action now as the market reacts favorably to "bad news."
He also noted that the S&P 500 looks to be testing the 4,200 level and that small caps continue to outperform.
— Carmen Reinicke
Chip stock sell-off deepens
A technologist inspects a computer chip.
Sefa Ozel | Getty Images
Stocks are near session lows, with the Nasdaq down 1.4% and the Dow losing about 100 points.
The worst performers in the Nasdaq 100 show that the chip sector is taking the brunt of this sell-off. Shares of Lam Research and Marvel Technologies are each down by more than 7%. KLA Corporation has dropped 6.6%, while Micron is down more than 5%.
Elsewhere, electric vehicle stock Lucid has slid 7%.
- Jesse Pound
Energy stocks lead in early trading
The energy sector is outperforming in early trading, with the Energy Select Sector SPDR Fund rising 2.6%.
Chevron has also gained more than 2%, making it the top stock in the Dow.
The stocks could be getting a boost from oil prices. U.S. benchmark West Texas Intermediate crude climbed back above $91 per barrel on Tuesday.
Stocks open lower
Stocks opened lower on Tuesday, as the chip sector is proving to be a headwind for the market this week.
The S&P 500 fell 0.3%, while the Nasdaq Composite dipped 0.9%. The Dow Jones Industrial Average shed 30 points, or 0.1%.
Investors looking ahead to CPI report
People shop in a supermarket as inflation affected consumer prices in New York City, June 10, 2022.
Andrew Kelly | Reuters
Many investors are watching Wednesday's inflation report as a potential pivot point for the market. Economists surveyed by Dow Jones are expecting the July consumer price index report to show a moderation in inflation.
Expectations are for CPI to rise 0.2% month over month, and for core CPI to rise 0.5%. That would be a slowdown from the increases 1.3% and 0.7%, respectively, in June.
"If you get good abatement of inflation, in combination with this historically strong labor market, you can make a case that the June 16 low was a bottom for the market," Kevin Simpson of Capital Wealth Planning said on "Squawk Box." "And I know it sounds crazy, but there's even a possibility that the Fed could thread this needle."
Productivity declines again in second quarter
Productivity declined and labor costs jumped in the second quarter, the Labor Department said Tuesday.
Nonfarm productivity fell at an annual rate of 4.6% during the second quarter, slightly better than the 5.0% decline expected.
Unit labor costs grew at annualized rate of 10.8%, which was higher than the 9.5% expected.
Labor costs are now up 9.5% over the past four quarters, which is the biggest four-quarter increase since 1982.
The decline in productivity and the jump in labor costs were both smaller than revised numbers of -7.4% and 12.7%, respectively.
Bank of America says clients piled into tech stocks last week
Last week, Bank of America Securities clients were net buyers of US stocks for the sixth consecutive week, the firm said Tuesday. Total inflows were $1.8 billion.
The tech sector saw the biggest inflows of the week, with the highest weekly flows since at least 2008, Bank of America said. Overall, buying was concentrated in large cap stocks.
However, the firm did say that hedge funds were net sellers during the period.
— Jesse Pound
Analysts are unusually bullish, Citi says
Despite some high-profile earnings misses and signs of slowing growth in the economy, Wall Street analysts are unusually optimistic about the stocks they cover, according to Citi.
"Our index of global sell-side stock calls is back at peak bullishness, so triggering a red flag in our Bear Market Checklist," Citi strategist Robert Buckland said in a note to clients. "Analysts are most bullish in the US and, increasingly, EM. They are less bullish in Europe and Japan, but not by much. There are few signs they see a global recession coming."
Citi's sell-side index previously reached this peak bullish level in 2007 and 2000, before steep market drawdowns.
— Jesse Pound
Micron shares fall 4% on fresh guidance warning
Micron Technology's hard drive for data center customers is presented at a product launch event in San Francisco, October 24, 2019.
Stephen Nellis | Reuters
Shares of Micron tumbled 4% in the premarket after the semiconductor company warned that revenue for the current quarter may fall below or near the lower end of its recent forecast provided on June 30.
The company cited macro and supply chain issues among the reasons for the adjustment.
The news from Micron comes a day after Nvidia released preliminary earnings that showed early second-quarter revenue come in well below initial estimates as the chipmaker grapples with weaker gaming revenue.
Shares of Nvidia slipped about 3% while the iShares Semiconductor ETF slumped 1.5% in the premarket.
— Samantha Subin
Stock futures fall as Micron warns
Stock futures gave up earlier gains and fell into the red after a negative warning from chipmaker Micron and as bond yields crept higher.
S&P 500 futures were down by 0.2% after trading in the green earlier in the overnight session.
European markets retreat slightly as focus turns to U.S. inflation, Fed outlook
European markets pulled back slightly on Tuesday as focus in global markets turns to a key U.S. inflation print due Wednesday.
The pan-European Stoxx 600 slipped 0.2% by mid-morning, with travel and leisure stocks shedding 1.2% to lead losses while insurance stocks gained 0.8%.
Earnings also remain a key driver of individual share price movement in Europe, with Abrdn, IHG, L&G, Continental and Munich Re among those reporting before the bell on Tuesday.
- Elliot Smith
Hong Kong's exchange receives Alibaba's application for a primary listing
The Hong Kong Stock Exchange has acknowledged Alibaba's application to change its Hong Kong listing status to a primary listing from secondary, according to a filing.
Gaining primary status in Hong Kong would make Alibaba eligible for inclusion in a stock connect program with mainland China.
The Chinese e-commerce giant is also listed on the New York Stock Exchange and will have a dual primary listing on both exchanges if the process in Hong Kong is completed.
The conversion will likely take effect before the end of 2022, the company said.
Shares of the Alibaba in Hong Kong rose 2.42% after that news, which was first announced two weeks ago. U.S.-traded shares of Alibaba were down nearly 2% overnight.
— Abigail Ng, Evelyn Cheng
Novavax shares plunge
A health worker prepares a dose of the Novavax vaccine as the Dutch Health Service Organization starts with the Novavax vaccination program on March 21, 2022 in The Hague, Netherlands.
Patrick Van Katwijk | Getty Images
Shares of Novavax plummeted 32% in after hours trading after the biotech company cut its full-year revenue guidance roughly in half because of poor demand for its Covid vaccines.
Novavax said it expects to generate $2 billion to $2.3 billion in revenue in 2022, compared to previous guidance of $4 billion to $5 billion in revenue for the year.
— Sarah Min
Stock futures tick higher after Monday's mixed session
Stock futures rose slightly Monday night after the S&P 500 and Nasdaq posted slight losses in regular trading.
Futures tied to the Dow Jones Industrial Average traded 40 points higher, or 0.1%. S&P 500 and Nasdaq 100 futures advanced 0.1% each.
Better-than-expected earnings results
The major averages have rallied this earnings season on the back of better-than-expected results. Of the 439 companies that have reported results through Monday, about 75.3% have beat expectations, according to FactSet.
— Sarah Min