Stocks fall before the Fed; QQQ Climbs in Late Trading: Market Recap

(Bloomberg) – Stocks tumbled after paltry economic numbers and a weaker outlook for the world’s largest retailer underscored the effects of inflationary pressures on consumer spending, with recession fears rife as the Federal Reserve weakens. is about to offer another huge hike.

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Walmart Inc.’s rout engulfed industry peers, with Morgan Stanley saying its guidance is a “potential warning signal” for Amazon.com Inc.’s commodity margins. traded $166 billion following the Nasdaq 100 (QQQ) rose as Google parent Alphabet Inc. and Texas Instruments Inc. surged after earnings. Microsoft Corp. fell amid its weakest sales growth since 2020.

Traders also braced for another 75 basis point hike from Fed officials on Wednesday, with a combined 150 basis point hike in June and July representing the biggest rate hike since the early 1980s. when then-President Paul Volcker was battling sky-high inflation. . Darkening views on the economy sent U.S. consumer confidence tumbling to the lowest level since February 2021, while an indicator for new home sales fell for the fifth time this year.

Read: IMF cuts global GDP outlook for third time as inflation, rates rise

U.S. officials should stay hawkish longer amid persistently high inflation, say strategists at Goldman Sachs Group Inc., the latest to enter the debate over a potential central bank pivot as growth slows . They echoed the views of Morgan Stanley’s Michael Wilson, who noted on Monday that it was too early to expect the Fed to halt its hike. Meanwhile, strategists at JPMorgan Chase & Co. said bets that prices have peaked will lead to a pivot from the Fed and improve the situation for equities in the second half.

“A soft landing seems a long way off,” wrote Seema Shah, chief global strategist at Principal Global Investors. “In the past 11 cycles of tightening, the Fed has dodged recession only three times (1965, 1984 and 1994). In each of those cycles, inflation was lower and the fed funds rate was significantly higher when it took off, so Fed tightening didn’t need to be as dramatic as it does. today.

Other company highlights:

  • United Parcel Service Inc. had disappointing parcel deliveries.

  • General Motors Co. posted a lower profit than analysts’ estimates as semiconductor shortages kept production volumes in check.

  • 3M Co. plans to divest its multi-billion dollar healthcare business.

  • Sales of McDonald’s Corp. and Coca-Cola Co. exceeded expectations.

  • General Electric Co. beat profit estimates and reported surprise positive cash flow as sales in the key jet engine division soared.

  • Archer-Daniels-Midland Co. sees strong demand for food crops at least through the end of 2022 after posting its record profit.

  • Coinbase Global Inc. is facing a US investigation into whether it improperly let Americans trade digital assets that should have been registered as securities, according to three people familiar with the matter.

The annual summer lull, combined with steadily deteriorating economic conditions and recession fears, is also keeping junk bond borrowers on the sidelines, with a monthly supply of $1.06 billion in July the slower at least since 2006.

Read: Goldman sees imminent end to ‘uncomfortably low’ bill supply

Here are some key events to watch this week:

  • Apple, Amazon, Meta gains expected this week

  • Fed Policy Decision Briefing Wednesday

  • CPI Australia, Wednesday

  • US GDP, Thursday

  • Eurozone CPI, Friday

  • US PCE Deflator, Personal Income, University of Michigan Consumer Sentiment, Friday

Musk, Tesla and Twitter are this week’s topic of the MLIV Pulse survey. Also, share your views on the most important stocks in the S&P 500. Click here to get involved anonymously.

Some of the major movements in the markets:

Shares

  • The S&P 500 fell 1.2% at 4 p.m. PT

  • The Nasdaq 100 fell 2%

  • The Dow Jones Industrial Average fell 0.7%

  • The MSCI World index fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4%

  • The euro fell 1% to $1.0117

  • The British pound fell 0.2% to $1.2023

  • The Japanese yen was little changed at 136.82 per dollar

Obligations

  • The 10-year Treasury yield was little changed at 2.80%

  • Germany’s 10-year yield fell nine basis points to 0.92%

  • The UK 10-year yield fell two basis points to 1.92%

Goods

  • West Texas Intermediate crude fell 1.8% to $94.96 a barrel

  • Gold futures fell 0.2% to $1,733.70 an ounce

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