4:15 pm: Equities go the way of the Treasury market
The Dow closed Tuesday down 697 points, 2.1%, at 33,130, the Nasdaq Composite fell 295 points, 2.5%, to 11,492 and the S&P 500 declined 82 points, 2%, to 3,997. The small-cap Russell 2000 index lost 56 points, 2.9%, to 1,890.
The market swoon is indicative of stocks following the lead of the Treasury markets, according to B. Riley Wealth’s chief market strategist Art Hogan
“I think it’s the equity markets that finally caught up to what the Treasury markets have been saying for a couple of weeks,” Hogan said, per CNBC. “We’ve had a string of better-than-expected economic data. With every new data point, we saw a tick up in yields in the Treasury market. Now, I think the equity market is catching up to the fact that the Fed speakers mean business, and this data may well mean higher-for-longer interest rates … It’s just a catchup that was overdue."
Among the biggest fallers was The Home Depot Inc, shares of which fell more than 7% after the hardware retailer posted a disappointing earnings outlook.
12.05pm: Weak outlooks from two big retailers weigh on stocks
US stocks were sharply lower in noon trading following disappointing outlooks from Walmart and Home Depot.
At midday, the Dow dropped 549 points to 33,278, while the S&P 500 eased 68 points at 4,011 and the tech-heavy Nasdaq slipped 239 points to 11,548.
“While we believe that Q1 can initially stay robust, a fundamental confirmation for the next leg of the rally might end up lacking,” JPMorgan analyst Mislav Matejka wrote in a note Tuesday.
Home Depot shares were down nearly 6% midday, while Walmart stock was 0.5% higher.
9.35am: Weak retail guidance sends stocks lower
US stocks fell at the open after the long weekend as investors digested disappointing earnings from big-box retailers Walmart and Home Depot.
FOREX.com market analyst Fiona Cincotta noted that stocks had fallen as weak Walmart and Home Depot guidance had knocked risk sentiment, amid concerns about a more hawkish Fed.
“US markets are set to extend losses from last week amid ongoing concerns that the Federal Reserve will need to raise interest rates higher and for longer in order to tame high inflation after a series of stronger-than-expected macro data releases last week, including hotter-than-forecast inflation,” Cincotta said.
“Separately geopolitical concerns are back under the spotlight as President Putin gave a keynote speech, which showed no hint of the Ukraine war coming to an end soon. Instead, Putin threatened the west with a nuclear response, hurting risk appetite.”
Just after the market opened, the Nasdaq Composite had shed 138 points or 1.1% at 12,253 points, the Dow Jones Industrial Average was down 333 points or 1% at 33,533 points, and the S&P 500 had dipped 37 points or 0.9% at 4,050 points.
6.30am: FOMC minutes in focus
Wall Street is expected to start the holiday-shortened trading week lower as investors look to tomorrow’s release of the minutes of the most recent meeting of the Federal Reserve’s Open Market Committee (FOMC) for clues into the outlook for monetary policy as inflation remains stubbornly high.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.8% in Tuesday pre-market trading, while those for the broader S&P 500 index also declined 0.8%, and contracts for the Nasdaq-100 shed 0.9%.
US markets ended mixed ahead of the Presidents’ Day long weekend, with the DJIA closing 0.4% higher at 33,827 on Friday, while the Nasdaq Composite lost 0.6% to 11,787 and the S&P 500 shed 0.3% to 4,079. The small-cap tracking Russell 2000 rose 0.2% to 1,945.
“The market feels like it is in a holding pattern right now as investors await the next meeting of the US Federal Reserve in a month’s time,” commented AJ Bell investment director Russ Mould. “Hints a 50 basis-point rate hike could be in the offing have helped sour sentiment a little but confirmation could really undermine investor confidence."
“In the meantime, a great guessing game is likely to take place with the Fed minutes, updated US GDP figures for the fourth quarter and core inflation data all providing some clues on the likely trajectory of interest rate policy later this week," he added.
Markets are currently pricing in a higher terminal interest rate of about 5.3% for July, with the 2023 rate curve remaining above 5% as investors abandon hopes of rate cuts this year, TickMill Group’s Market Analyst Patrick Munnelly said.
“With the US inflation backdrop remaining stubbornly sticky, combined with the robustness of the employment landscape, it is likely the Fed minutes will confirm that the Open Market Committee are poised to keep the pedal to the metal on the higher-for-longer rates mantra," Munnelly added.
Today, quarterly earnings releases from Walmart and Home Depot will provide more insight into the health of the US consumer, while Medtronic, Palo Alto Networks and Molson Coors are also due to report.