4.10pm: US markets mixed at the end of a volatile session
US markets ended a volatile session in mixed fashion with investors awaiting a number of inflation reports later this week that will give further insight as to how aggressively the Federal Reserve will hike interest rates going forward in its battle to tame inflation.
At the close the Dow Jones Industrial Average was up 36 points, or 0.12%, at 29,239, the S&P 500 was down 24 points, or 0.66%, at 3,589, and the Nasdaq Composite was 116 points, or 1.10%, lower at 10,426, its lowest close since July 2020.
On Wednesday, the producer price report will be released, followed by the September consumer price index on Thursday, while on Friday, September retail sales are also due.
The path of the central bank’s interest rate increases will determine whether or not the US economy falls into a recession or experiences a soft landing.
“This is an awful stock market environment that is grappling with a weakening economy, uncertainty over earnings and how long the Fed’s tightening will last, and sentiment issues with an extremely risk averse investor psychology,” said David Bahnsen, chief investment officer of The Bahnsen Group, in a Tuesday note.
12.05pm: US markets choppy at midday
Two of the three major US indices flipped to green territory just before the noon bell, as trader sentiment turned optimistic despite a report from the International Monetary Fund downgrading its global forecast.
At midday, the S&P 500 was up by 0.2% at 3,618, while the Nasdaq Composite was down by 0.05% at 10,537 and the Dow Jones was up by 0.9% at 29,455.
Michael Hewson, chief market analyst at CMC Markets, said losses accelerated for American markets with the International Monetary Fund adding to the negative tone by downgrading its global growth forecast for next year to 2.7%, while admitting that its target could fall further if economic conditions continue to deteriorate.
“Its chief economist Pierre Olivier Gourinchas said the worst is yet to come, and that 2023 could be a very bad year. The fund also warned that inflation is set to rise further and could peak sometime later this year, suggesting the need for more rate rises,” Hewson wrote in a report.
In the US, the producer price report will be released on Wednesday, followed by the September consumer price index Thursday. The September retail sales numbers, released on Friday, will give further insight into consumption.
Crude oil prices slipped for the second day in a row, retreating from their highest levels in six weeks yesterday, as fears over future demand serve to cap the recent rebound. At midday, West Texas Intermediate was down 2.2%, trading at US$89.20 a barrel.
The major movers at midday included global healthcare company Viatris and biotech company Amgen, both up over 6%. American Airlines rose by 2.5% on the company upping its revenue forecast after a strong travel season this summer.
On the downside, Wynn Resorts and Las Vegas Sands both were down by 6.5% and 5.2% respectively, after China imposed lockdowns in several cities due to a spike in Covid daily cases.
9.35am: Wall Street losses continue
US stocks slipped into the red on Tuesday morning with chopping trading expected to continue as earnings season kicks off amid continued inflationary pressures and heightened geopolitical tensions.
Just after the market opened, the Dow Jones Industrial Average had shed 50 points or 0.2% at 29,153 points, the S&P 500 was down 17 points or 0.5% at 3,596 points, and the Nasdaq Composite had dipped 58 points or 0.6% at 10,483 points.
Forex.com market analyst Fiona Cincotta noted that risk-off trade and hawkish Fed bets continued to boost the greenback (US dollar). “Russia escalating the war with Ukraine, the US chip crackdown to China are hurting the market mood,” she added.
“Meanwhile, Federal Reserve vice Chair Lael Brainard reiterated the Fed’s commitment to fighting inflation… ahead of the FOMC minutes due tomorrow and US CPI inflation data due on Thursday.”
6.30am: More falls expected
US stocks are expected to open lower again on Tuesday amid concerns that the world’s biggest economy will take a hit from higher interest rates and escalating geopolitical risks.
Futures for the Dow Jones Industrial Average were down 0.9% in pre-market trading, while those for the S&P 500 were 1.0% lower and contracts for the Nasdaq-100 shed 1.0%.
“It’s rare that we have such a sour mixture of bad news on the wire,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
She cited escalating tensions in Ukraine, rising COVID-19 cases in China, mounting tensions between US and China, the sell-off in US and other treasuries, and the relentless appreciation in the US dollar as factors for the gloomy outlook.
“First, the week started with images of Russian bombs falling on Ukrainian cities following the blast on the bridge that linked Russia to Crimea. That means a further escalation of the war before winter. And it’s extremely bad news,” she said.
Meanwhile, a surge in COVID-19 cases in China is fueling fears that the likes of Shanghai or Shenzhen will face lockdowns and there has been a ratcheting up in tensions between the US and China, she added.
“ (US president) Joe Biden’s latest decision to further restrict chip exports to China didn’t please the Chinese, nor chip investors. Nvidia took another 3% hit in the teeth yesterday and slipped below the $120 per share for the first time since March 2021,” noted Ozkardeskaya.
US stocks were already on a downer after Friday’s non-farm payrolls came in higher than expected, suggesting that the Federal Reserve’s aggressive interest rate hikes will continue as rate setters fight inflation. The Federal Reserve has delivered three 75 basis point interest rate hikes this year and a fourth is seen as a growing possibility in November.
As things stand, the US earnings season kicks off amid a worrying environment. Analysts are slashing profit forecasts and some predictions indicate the S&P500 will slump to its worst level since 3Q 2020 when markets were hit by the COVID-19 pandemic, said Ozkardeskaya.
Key banks are due to release quarterly results later this week, among them Blackrock on Thursday while JP Morgan Chase and Morgan Stanley report on Friday.
On the data front, producer price figures for September are due on Wednesday, and consumer price inflation data, also for September, are due on Thursday.
Contact the author at jon.hopkins@proactiveinvestors.com