Traders on the floor of the NYSE, June 27, 2022.
U.S. stocks seesawed on Tuesday as worries over global economic growth dented investor appetite for risk assets and Wall Street looked ahead to what could be a difficult earnings season.
The Dow Jones Industrial Average rose 129 points, or 0.43%, while the S&P 500 added 0.18% and Nasdaq Composite gained 0.19%. The Dow opened sharply lower before recovering those losses.
“There’s a lack of a catalyst, a lack of a leadership right now,” said Truist’s Keith Lerner. “Growth is slowing and global central banks are still in tightening mode and I think that’s concerning the markets.”
Investors appeared to be shunning riskier assets such as stocks in favor of traditional safe havens such as U.S. Treasurys and the dollar. The 10-year Treasury yield fell 9 basis points to 2.9%.
Some beaten-up tech shares bounced on Tuesday as investors continued to weigh growth fears.Apple added 2%, while Meta Platforms, Nvidia and Tesla moved marginally higher. Twitter shares, which have been volatile after Elon Musk terminated his deal to purchase the social media company, added 2.6%. Microsoft lost 2.9% and Salesforce dropped more than 4%.
Airline stocks jumped with shares of Delta, United, and Southwest up more than 4% while American Airlines rose 8.4%. Battered cruise stocks Norwegian and Carnival added about 5% each. Peloton shares gained 4% after the fitness company announced it will outsource its manufacturing.
Materials and industrials rallied 1% each while energy tumbled 2% as oil prices declined. Halliburton, Devon Energy and Chevron slipped about 2% each.
Earnings season begins
PepsiCo kicked off the corporate earnings season on Tuesday. The snacks and beverage company reported a better-than-expected quarterly profit and revenue and raised its revenue outlook for the year. Delta Air Lines and JPMorgan Chase are among the companies slated to report later this week.
Market participants are watching for downside risk to earnings forecasts as companies grapple with rising interest rates and greater inflationary pressures, and Wall Street debates the likelihood of a recession.
Marathon Asset Management’s Bruce Richards said Monday on CNBC’s “Closing Bell” “that the S&P 500 is already headed for an earnings recession.
“Companies are getting squeezed at all sides, they’re getting squeezed on cost of goods and the wages and all things that go into input from our manufacturing goals or services,” he said. “And on the other end, we think revenues are starting to flatten before turning down at a time when interest cost is going up. …That’s a lot of downgrades, a lot of potential defaults coming from the system as a result of higher charges.”
Businesses able to show they can pass off high commodity prices will stand out this earnings season, Lerner said.
The dollar strengthens
The dollar index, which measures the U.S. currency’s performance against six other currencies, popped 0.5% to 108.51. That gain put the euro on the brink of parity with the dollar, as recession fears grow in Europe.
The dollar index has been on fire this year, rising 13%. Several Wall Street strategists have warned that this strength in the U.S. currency could spell trouble for corporate earnings ahead.
“The surging USD is a symptom of global unease and will make life even more difficult for Corporate America (the EPS headwind from FX is going to be enormous) and int’l central banks (as the slumping EUR, GBP, etc., adds to the inflationary pressures in the EU and UK),” wrote Adam Crisafulli of Vital Knowledge.
Inflation is also on investors’ radars this week with June’s consumer price index report set for release Wednesday. The headline inflation number, including food and energy, is expected to rise to 8.8% from May’s level of 8.6%, according to estimates from Dow Jones.
“The bottom line is that inflation may stay elevated for another month or two,” wrote Art Hogan, National Securities’ chief market strategist, adding that June’s core reading should indicate “some sequential improvement.”