4:20pm: Consumer confidence leaves much to be desired
The Dow closed Tuesday down 491 points, 1.6%, at 30,947, the Nasdaq Composite lost 343 points, 3%, to 11,182 and the S&P 500 dropped 79 points, 2%, to 3,822.
The benchmarks started the session on the right foot but steadily fell over the course of the day.
Investors were reacting in part to the Conference Board Consumer Confidence Index, which decreased in June to 98.7 from 103.2 in May, below the market expectation of 100 and its lowest level since February 2021.
“Right now we are at an inflection point in the economy, where actual spending and economic activity is still positive, however, consumer confidence and financial conditions (especially interest rates) are indicating a slowdown ahead,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, as reported by CNBC. “If we are able to avoid a recession then the stock market is fairly valued, however, if we do go into recession then we would expect the lows for the year haven’t been hit yet.”
12.05pm: Consumer confidence down
US stocks had sunk at noon as new survey data shows consumer confidence fell in June.
At midday, the Dow Jones Industrial Average had shed 212 points at 31,226 points.
The S&P 500 was down 47 points at 3,853 points and the Nasdaq Composite had lost 234 points at 11,290 points.
The Conference Board Consumer Confidence Index decreased in June to 98.7 from 103.2 in May – falling below the market expectation of 100 and reaching its lowest level since February 2021.
Pantheon Macroeconomics chief economist Ian Shepherdson noted the measure was bad, but nowhere record lows.
“As always, remember that spending and sentiment - whichever measure you use - are not the same thing - and spending is what matters,” he said. “We see few signs at this point that consumers are buckling, though the rate of growth of spending likely is slowing.”
City Index and FOREX.com market analyst Fawad Razaqzada said as another consumer confidence barometer plunges, renewed weakness was triggered in the markets.
“The latest data is pointing to recession and, as we will undoubtedly find out in the weeks ahead, lower earnings for companies,” he said.
“Against this backdrop, it is difficult to justify buying stocks on the hope that the Fed will ignore inflation and start cutting back interest rates from as early as next year. I am therefore of the view that the markets will remain in the ‘sell-the-rallies’ rather than ‘buy-the-dip’ mode.”
10.50am: Proactive North American headlines:
Apple's hearing bid on two Qualcomm patents rejected by US Supreme Court
VR Resources says new assay results from Hecla-Kilmer drill program confirm broad intersections of critical metals
Marble Financial says its CEO Karim Nanji named Canadian Lenders Association's 'Executive of the Year' for 2022
Pathfinder Ventures (TSX-V:RV) reports 36% jump in reservations despite rising fuel costs and inflation
LithiumBank Resources finds above average lithium grades in four wells at Boardwalk Brine Project in Alberta
Prospector Metals reports high-grade gold along newly identified Wiggle Deformation Zone at its Savant project in Ontario
CO2 GRO announces sale of second CO2 Delivery Solutions to greenhouse vegetable grower Hidroexpo in El Salvador
Electric Royalties inks deal to sell two thirds of its Seymour Lake 1.5% NSR to Lithium Royalty for C$4M
Nike beats expectations despite Russia exit and China rout
Stifel GMP repeats 'Buy' recommendation on Steppe Gold as ramp up at ATO mine exceeds broker's expectations
Clean Air Metals announces new assay results from 2022 drill campaign at Thunder Bay North Project
Thesis Gold welcomes continued drilling success at Thesis III area of Ranch project
Think Research Corporation (TSX-V:THNK, OTCQB:THKKF) wins contract from major US pharmacy to deliver business intelligence and support solutions
enCore Energy inks uranium sales deal with a US-based nuclear power company
Nextech AR Solutions Corp says Map D division signs multiple deals for its self-serve event management software solution
Victory Resources completes extensive ground sampling program at Smokey Lithium property in Nevada
Skye Bioscience is primed for meaningful clinical development of cannabinoid-derivative drug SBI-100 OE for glaucoma
Caledonia Mining offers significant growth potential
9.35am: China news boosts stocks
US stocks opened higher on Tuesday as the news China had halved its required quarantine time for travellers buoyed investor confidence.
Just after the open, the Dow Jones Industrial Average had gained 198 points at 31,636 points.
The S&P 500 had added 21 points at 3,921 points and the Nasdaq Composite had added 39 points at 11,564 points.
Meanwhile, new data shows US housing price growth decelerated in April for the first time since November 2021.
According to the S&P CoreLogic Case-Shiller index, house prices climbed 20.4% in April, compared to 20.6% in March – an indication that rising mortgage rates may be beginning to have an impact on house prices.
6.30am: Rise expected
US stocks were expected to open higher on Tuesday, recovering after a late fall back on Monday to resume a recent rally as investors assessed news that China is loosening its coronavirus (COVID-19) travel restrictions and looked ahead to fresh US economic data.
Futures for the Dow Jones Industrial Average were trading 0.5% higher pre-market, while those for the broader S&P 500 index and the tech-laden Nasdaq-100 were also both up 0.5%.
News that China’s National Health Commission has said it would loosen its strict quarantine requirements for international travellers helped lift the mood on Tuesday. Travel firm stocks rose pre-market boosted by the China move.
Energy companies were also positive features pre-market as oil prices rose, with Brent crude adding 1.3% to $112.44 a barrel.
Weakening economic data have recently provided investors with some hope that the Federal Reserve might become less hawkish as it tries to tackle sky-high inflation but the overall mood remains fragile.
Richard Hunter, head of Markets at interactive investor, commented: “Markets in the US drifted lower after a recent run of gains, opening up the debate as to whether the spike was something of a relief rally, rather than a conviction rally. Investor confidence takes time to build but is easily shattered and as such volatility is never far away. Even so, the losses were shallow in the absence of any strong catalysts, with volumes light, suggesting that there could be an element of calm before the next set of challenges arrive."
He added: "The main test over the following weeks is likely to come in the form of the second quarter and half-year reporting season, where the current state of the economy on the ground will become apparent. At this early stage, pre-announced company data is suggesting that almost twice as many corporates are likely to show weaker rather than stronger numbers. This would represent an improvement from the first quarter of this year, but a decline from the same period a year ago.
"In the meantime, losses were capped by some economic data for durable goods in the US which showed a strong increase in May, implying a continuation of business spending. This in turn could vindicate the Federal Reserve’s insistence that the economy remains robust enough to withstand the current round of rate rises, although of course such data cannot be taken in isolation. Further releases today on consumer confidence and house prices will add further colour to the state of the nation."
Hunter concluded: "The main indices therefore remain entrenched in negative territory for the year, with the Dow Jones having lost 13.5%, the S&P500 18% and the tech-heavy Nasdaq continuing to bear the brunt of a higher interest rate environment, losing 26% so far in 2022."
Contact the author at jon.hopkins@proactiveinvestors.com