Stocks closed broadly lower on Wall Street on Tuesday, a discouraging snapshot of US consumer confidence after investors worried about the risk that increasingly higher interest rates and broader inflation could trigger a recession. Is.
The S&P 500 ended 2% down, having gained 1.2% from the day before. The Dow Jones Industrial Average fell 1.6% and the Nasdaq Composite was down 3%.
Roughly 85% of stocks in the benchmark S&P 500 closed in the red. Technology, communications and health care stocks were a big part of the decline. Retailers and other companies that rely on direct consumer spending also helped lower the index. Energy stocks, the only sector in the index, gained this year as crude oil prices rose.
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Conference Board Consumer Confidence
Index got off to a solid start, but gains faded by noon after the Conference Board reported that its Consumer Confidence Index in June was at its lowest level in more than a year. fell down. The decline was primarily driven by concerns over inflation, including rising gas and food prices. The results were also much weaker than economists expected.
“As long as inflation remains high, confidence will continue to shrink,” said Chris Zacarelli, chief investment officer at the Independent Advisor Alliance. “It all comes back to inflation, it’s ultimately driving backlash from the Fed and impacting market and consumer confidence.”
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Investors face a broad list of concerns centered on rising inflation, shrinking businesses and consumers. Supply chain problems that are at the root of rising inflation have been worsened by an increase in COVID-19-related restrictions in China over the past several months.
Traders have increased prices on everything from food and drink to clothes. Russia’s invasion of Ukraine in February put even more pressure on consumers to raise energy prices and push petrol prices to record highs.
Consumers were already spending from goods to services as the economy recovered from the effects of the pandemic, but sharp inflationary pressures have prompted a sharp shift away from discretionary goods like electronics to necessities.
Rising inflation raises the possibility of recession
Stubborn inflationary pressures have led to a major change in policy from central banks, which are raising rates to try to tame inflation after years of lowering rates to help economic growth. Huh.
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Now, they’re trying to slow economic growth, but investors are worried they could go too far and actually push the economy into recession could be pushed up as key economic indicators are already showing a slowdown in things like retail sales.
“The market is panicking at the speed with which consumers are losing confidence, and this could potentially spell a soft landing,” said Sam Stovall, chief investment strategist at CFRA.
Fed comment and company earnings
Investors await comments expected for midweek by central bank leaders including Fed Chair Jerome Powell and European Central Bank chief Christine Lagarde. He will also get another update on US economic growth on Wednesday when the Commerce Department releases a report on first-quarter GDP.
Wall Street is also preparing for the latest round of corporate earnings over the next few weeks, which will help paint a clearer picture of how companies are dealing with the squeeze from rising costs and consumers are cutting some spending.
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athletic footwear and apparel giant Nike gave investors a cautious update on the potential fell 7% as the lockdown in China impacted revenues. According to FactSet, the company relies on China for about 17% of its revenue.
Wynn Resorts rose 3.2% and Las Vegas Sands gained 4%. Companies with major gambling businesses in China got a boost after China eased a quarantine requirement for people coming from abroad.
Technology and communications companies were the worst hit on Tuesday. Microsoft fell 3.2% and Apple 3%. Google parent Alphabet dropped 3.3%.
Energy stocks posted solid gains as US crude oil prices rose 2%. Hayes rose 5.6% for the biggest gainer in the S&P 500
. The yield on the 10-year Treasury note, which helps determine mortgage rates, held steady at 3.19%. Foreign markets boomed.