US stocks pared losses earlier, and the Nasdaq turned positive on Tuesday afternoon, even as concerns about the possibility of a deeper economic downturn persisted among investors.
Afternoon trading saw the S&P 500 drop by 0.9%. The index was down as much as 2.2% at session lows. The Dow had lost more than 400 points on the day, or about 1.6%, as of 1:48 p.m. ET. The Nasdaq Composite Index erased its previous losses to trade in the positive territory.
Energy prices were also under renewed pressure, with West Texas Intermediate crude futures dropping below $100 a barrel and posting their biggest drop since March at session lows. Treasury yields extended a decline last week, and the benchmark 10-year yield fell below 2.9%.
“Stock prices are dropping. Treasury yields are down. Oil prices are down. Corporate credit spreads are wider. The dollar exchange rate is higher. This is a slack trade.” Tuesday morning email. “There is no other way to describe it.”
Concerns about inflation and whether higher prices could trigger a downturn in the economy or prompt the Federal Reserve to tighten monetary policy further at the expense of economic growth kept the weight on stocks even amid short-term bear market rallies. Federal Reserve officials have so far maintained the bank’s hawkish stance, and Fed Chair Jerome Powell said in public comments last week that there was “no guarantee” that the Fed could avoid a hard landing.
The S&P 500 has so far had its worst start since 1970, and the Dow since 1962, with both major averages down double-digit percentages since the start of 2022. The US economy has recently shown some signs of slowing, with consumer confidence waning and short-term expectations waning. to its lowest level in nearly a decade as well as spending falling for the first time this year in May.
Sam Pollard, chief economist at Wells Fargo, wrote: “Last week’s data performance, including a downward revision to first-quarter GDP and evidence of a continued slowdown in consumer spending, suggest that the US economy is clearly losing momentum in the face of high inflation and tightening financial conditions. “. Tuesday note.
More important economic data is due this week, including Friday’s Nonfarm Payrolls report. Economists are looking for a return of 275,000 tepid jobs in June, which could represent a sharp slowdown from the previous month’s 390,000. The unemployment rate is expected to remain steady at 3.6%, just above the 3.5% low hit in February 2020 before the pandemic. On Wednesday, the Federal Reserve is preparing to release the minutes of its June meeting, which paved the way for the central bank’s first rate hike of 75 basis points since 1994.
“The current hawkish tone should be in place throughout the pursuit of the Fed’s 75 basis point rate hike actions and an explicit commitment to continue tightening aggressively until officials see ‘clear and convincing’ signs that inflation is coming down to target,” Bullard stated Wells Fargo. “We will be looking for clues about the inflation evidence that officials are watching to help make this call.”
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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