4:28pm: Fed may need to raise rates 3.75%-4% by year's end, Chicago Fed president says
The Dow Jones Industrials Average closed Tuesday down 402 points, 1.2%, at 32,369, the Nasdaq Composite lost 20 points, 0.2%, to 12,349 and the S&P 500 dropped 27 points, 0.7%, to 4,091.
Mixed early on, the major benchmarks waned in the afternoon after comments from regional Federal Reserve presidents indicated that the body may continue to raise rates to fight inflation.
For example, Chicago Federal Reserve Bank President Charles Evans told reporters Tuesday that he would like the central bank to implement a 50 basis point hike in September, followed by a series of 25 bp increases until the start of the second quarter of 2023. In total, Evans believes the Fed will have to raise rates between 3.75% and 4% by the end of 2022.
12.05pm: Dow down but other indexes up
The major US indices were mixed around midday on Tuesday as investors kept an eye on energy markets amid inflationary fears, and on short-term volatility driven by US-China relations.
The Dow Jones Industrial Average was down 0.4% at 32,665 points, but the S&P 500 was 0.3% higher at 4,119 and the Nasdaq Composite also added 0.3% at 12,411.
Joshua Mahony, senior market analyst at IG, noted that US markets were leading the losses today “as fears around a potential military escalation with China bring risk-off sentiment back into play.
He added: “This week has seen markets shift their attention to the risk posed by (US House speaker) Nancy Pelosi has landed in Taipei despite Chinese government warnings. Sharp volatility for USDCNH highlight market uncertainty over how the trip will play out, but ultimately it is likely that this current posturing will soon blow over despite a short-term rise in tensions.”
Mahoney also highlighted crude oil which is in view ahead of the OPEC+ meeting.
“With fears over economic activity in the tail end of the year, we have now seen much of the Ukraine war premium taken out of the market. From an inflationary perspective, the decline in energy prices does represent a positive for the wider market, and economists will be keenly watching for any shift in quotas from OPEC+ this week.
“In any case, the latest pullback in oil prices and the fact that many members will find it difficult to actually ramp-up production further should limit the chance of an inflation-busting rise in output this week,” Mahoney said.
At midday, the major S&P 500 movers included Monolithic Power Systems up almost 8% at US$499, while Molson Coors Beverage fell over 10%, based on a softening of sales in the company’s second quarter. On the Nasdaq, Intuitive Surgical (NASDAQ:ISRG) rose 5.8% but Ross Stores (NASDAQ:ROST) fell 2.8%, while on the Dow Jones Industrial Average, Travelers Company added almost 2%, but Caterpillar was down almost 4%.
10am: Proactive North America headlines:
Airbnb (NASDAQ:ABNB) tipped to report growth in traffic despite slowdown in online travel industry
Infinity Stone Ventures names Michael Townsend as executive chairman as it updates on exploration
Vivakor closes acquisition of energy companies with assets in key US oil basins
PharmaDrug announces non-brokered offering of $650,000 of convertible secured debentures and issuance of shares
South Star Battery Metals finalizes land purchase for Phase 1 mine construction at Santa Cruz Graphite Project in Brazil
Valeo Pharma secures loan from Sagard Healthcare Partners to fund acquisitions of pharmaceutical therapies
Helium One doing all the right things to resume drilling, says broker
Toubani Resources encouraged by Kobada Est area drilling at its Kobada gold project in Mali
Context Therapeutics (NASDAQ:CNTX) collaborates with Menarini Group to evaluate ONA-XR and elacestrant combination
Audacious reports 1,200% year-over-year revenue jump; record gross margins
Electra Battery identifies new mineralization in Idaho Cobalt Belt
Valeo Pharma enters into agreement with Kaleo to produce epinephrine auto-injector for Canadian market
Versus Systems expands into corporate meeting and events with first activation for Finastra
Copper Fox Metals eyes start of drilling at Eaglehead polymetallic porphyry copper project in British Columbia
Valeo Pharma enters commercialization and supply agreement with Novartis Canada for two ophthalmic therapies
Nextech AR Solutions Corp enters into arrangement plan to spin out ARway platform and assets
Snowline Gold enters five-year lease agreement for the installation of a solar generator system at its 'Forks' camp on its Rogue Project
Solstice Gold welcomes early indications from first phase drilling at Red Lake Extension (RLX) project
Thesis Gold receives amended permit for Ranch Gold Project
enCore Energy uncovers three 'distinct' uranium zones with high-grade mineralization at Rosita Project in South Texas
Clean Air Metals unveils new assay results from the 2022 drill campaign from Escape and Current deposits at its Thunder Bay North Project
Ready Set Gold updates on Northshore Gold Project; announces withdrawal from Hemlo Eastern flanks
9.40am: Shares fall as geopolitical tensions rise
US stocks opened lower ahead of another slew of corporate earnings and amid growing geopolitical tensions around House Speaker Nancy Pelosi’s planned trip to Taiwan.
Just after the open, the Dow Jones Industrial Average had shed 179 points at 32,620 points.
The S&P 500 was down 13 points at 4,106 points, and the Nasdaq Composite had dipped 49 points at 12,320 points.
In terms of major movers, Uber Technologies Inc (NYSE:UBER) shares had soared about 14% at the open after the ride-share company reported its 2Q earnings. The company beat analyst expectations on revenue and reported a 33% year-over-year increase in gross bookings, however, posted a $2.6 billion loss.
Caterpillar Inc shares, on the other hand, had plunged about 5% after its 2Q revenue fell short of expectations, with the company’s results highlighting ongoing challenges around supply chain issues, its exit from Russia, and weakness in China.
6.30am: New month continues cautiously
US stocks were expected to extend August's declines on Tuesday, having snapped the three-session winning streak that came at the end of the previous month as worries over a global recession revive and as geopolitical tensions increase after another warning from China about US House Speaker Nancy Pelosi's planned visit to Taiwan.
Futures for the Dow Jones Industrial Average were trading 0.4% lower pre-market, while those for the broader S&P 500 index shed 0.5%, and contracts for the tech-laden Nasdaq-100 fell 0.7%.
Steve Clayton, fund manager at HL Select, Hargreaves Lansdown commented: "Wall Street struggled to make progress last night, after China informed the US that if House Speaker and senior Democrat, Nancy Pelosi, went ahead with a planned visit and set foot on Taiwanese soil, it would make a military response. Pelosi would be the most senior US politician to visit the disputed island in 25 years."
Corporate news could still provide a positive bulwark for the market, however. Shares of Pinterest soared more than 20% higher in extended trading on Monday despite reporting disappointing earnings after activist firm Elliott Management revealed it is the largest investor in the social media company.
And Cowen shares rose by nearly 5% after The Wall Street Journal reported that Toronto-Dominion Bank is close to buying the investment bank for more than $1 billion.
More earnings data is also due out on Tuesday, with DuPont, Caterpillar, KKR, Marriott International, and Uber Technologies all set to report ahead of the opening bell, while Starbucks, Airbnb (NASDAQ:ABNB), Advanced Micro Devices and Prudential Financial will report after the market close.
Meanwhile, comments from Fed officials could offer clues on whether the central bank will temper the size of its rate rises at future meetings, with Federal Reserve Bank of Chicago president Charles Evans and St. Louis Fed president James Bullard set to speak at separate events later Tuesday.
On the data front, investors this week are mostly focused on the July US non-farm payrolls report due out on Friday.
Contact the author at jon.hopkins@proactiveinvestors.com