Stocks fall for a second day as investors assess tensions in China and a fresh batch of profits
Stocks open lower, dragged down by Dow’s 266-point decline
Stocks opened lower on Tuesday as traders digest tensions with China over House Speaker Nancy Pelosi’s visit to Taiwan, a new round of earnings reports and economic data to come later in the year. the day.
The Dow Jones slid more than 260 points and was weighed down by Caterpillar, which fell more than 4% on weaker-than-expected earnings. The S&P 500 slid 0.53% and the Nasdaq Composite fell 0.30%.
CNBC’s Jim Cramer says inflation has peaked, citing falling oil prices
The economy has peaked in inflation, as shown by the recent drop in oil prices, according to a Tuesday tweet from CNBC’s Jim Cramer.
“The speed of oil’s decline, I think, belies the idea, again, that we haven’t had a spike in inflation,” Cramer wrote. “Inflationists simply refuse to believe it could have peaked, regardless of the evidence.”
Data indicating a global slowdown in manufacturing sent oil prices down from their highs this week, although they have since recovered somewhat.
Stocks could rise after Pelosi arrives in Taiwan, JPMorgan says
Stock markets may overlook House Speaker Nancy Pelosi’s visit to Taiwan on Tuesday, especially if there is no immediate response from China, JPMorgan wrote in a Tuesday note.
“Senators from both sides of the aisle have traveled to Taiwan this year, including Democrats Duckworth and Menendez and Republicans Graham and Scott,” analysts wrote. “Part of the Chinese response to these visits has been military exercises in the Taiwan Strait and military aircraft overflights of Taiwan.”
Thus, parallels with Russia/Ukraine and the potential for parts of the global supply chain to shut down may be misguided, according to the memo.
“Today, Pelosi’s plane is scheduled to land about an hour after the US opens; if there is no immediate response, you could see markets rise,” JPMorgan analysts wrote. .
Don’t lose sight of JOLTS data, says El-Erian
Investors focused on Speaker of the House Nancy Pelosi’s trip to Taiwan should be sure not to overlook key economic data coming out today that could sway the way forward for the Federal Reserve.
“There’s so much attention on the US-China issue, don’t lose sight of the JOLTS data,” El-Erian said on CNBC’s “Squawk Box” on Tuesday, referring to the survey of job offers. employment and the rotation of the workforce scheduled for later in the morning.
This data is important for the Fed, he added, as it charts its course for potential interest rate hikes.
Bank of America says customers bought stocks for five straight weeks
Bank of America clients were net buyers of U.S. stocks last week, the fifth straight week of positive inflows, according to a note from strategist Jill Carey Hall. Total inflows were $4 billion, according to the memo.
“All client groups were buyers this week. Buying was led by institutional clients after selling the previous week, while hedge funds and private clients were net buyers for the second and fifth week in a row, respectively,” Hall wrote.
There were positive net purchases in nine of 11 sectors as Bank of America clients shifted to cyclical sectors, according to the note.
Pinterest shares still high after Elliott Management stake announcement
Shares of Pinterest rose more than 18% in premarket trading, holding up higher from Monday night after activist investor Elliott Management announced it had taken a stake in the company and was its largest investor.
The image-sharing company also announced results on Monday that disappointed both in terms of earnings and revenue, but showed a higher than expected number of users.
Uber increases its turnover
Uber shares jumped more than 10% in premarket trading after the company reported quarterly earnings that beat Wall Street revenue expectations.
The company also reported a net loss of $2.6 billion for the quarter, part of which was attributed to investments in Aurora, Grab and Zomato.
Impact of Pelosi’s trip on the markets
Mona Mahajan, senior investment strategist at Edward Jones, addressed the market impact of Pelosi’s possible visit to Taiwan during an appearance on CNBC’s “Squawk Box” on Tuesday:
“Geopolitical tension has been a theme that we have really watched all year and that has weighed on the markets. … The risk and worry is that we have a Russia-Ukraine 2.0, something that is even more serious in from China. I think right now it’s an extreme risk. I think the trip won’t cause any real economic disruption, but of course the rhetoric and the headlines are starting to escalate and it’s is something we need to watch out for in the future.”
Caterpillar tumbles after reporting revenue
Caterpillar shares fell more than 1% after the industrial giant posted mixed quarterly results. The company earned $3.18 per share, beating the Refinitiv consensus forecast of $3.01 per share. However, Caterpillar’s revenue of $14.25 billion was just below an estimate of $14.35 billion.
Treasury yields fall in early trading
U.S. Treasury yields fell in early trading on Tuesday ahead of House Speaker Nancy Pelosi’s scheduled trip to Taiwan. The benchmark 10-year rate fell more than 5 basis points to 2.548%, while the 2-year rate slipped to 2.856%.
Oil giant BP raises dividend as quarterly profits jump on high commodity prices
British oil giant BP raised its dividend on Tuesday as it posted bumper second-quarter profits, benefiting from a surge in commodity prices.
Underlying second-quarter replacement cost profit, used as an indicator of net profit, was $8.5 billion. Soaring profits allowed BP to increase its quarterly dividend to shareholders by 10% to 6.006 cents per common share.
European stocks fall, following global risk aversion sentiment
European markets fell slightly on Tuesday, following global risk aversion sentiment as investors assess whether last month’s rally has yet to continue.
The pan-European Stoxx 600 fell 0.6% in mid-morning London, with tech stocks shedding 2.1% to lead losses as nearly all sectors and major exchanges slipped into the red. Telecoms gain 0.6%.
Earnings remain a key driver of individual stock price performance. BP, Ferrari, Maersk and Uniper were among the top European companies reporting before the bell on Tuesday.
Chinese stocks fall as tensions rise over Pelosi visit
Flat Open Equity Futures Contracts
Stock futures opened flat in overnight trading on Monday.
Futures contracts linked to the Dow Jones Industrial Average edged down 0.06%, or 21 points. S&P 500 and Nasdaq 100 futures fell 0.06% and 0.01% respectively.
— Samantha Subin
The upside from here is limited over the next few months, says Truist’s Lerner
Investors overinvested in equities should consider using current market conditions to trim their positions, as the upside in equities is limited going forward, says Keith Lerner, co-chief investment officer at Truist.
According to Lerner, market upside over the next few months is likely capped between 3% and 5%, but the downside could exceed that amount.
“The market has been very resilient, no doubt, and maybe it will be for a little while, but we don’t see the risk-reward ratio as compelling here,” he said.
This is by no means an indication of the top of the market and shares could rise, but it is an opportunity to reallocate exposure after the market’s strong rally last month, Lerner added.
Pinterest shares rise 21% as Elliott Management reveals position as biggest investor
Pinterest shares jumped more than 21% after the company posted higher-than-expected user numbers and Elliott Management revealed it was the image-sharing company’s largest shareholder.
Activist investor Elliott said in a statement that he was “convinced of the opportunity to create value” at Pinterest, calling the social media company a “highly strategic company with significant growth potential.”
“As the market-leading platform at the intersection of social media, search and commerce, Pinterest is uniquely positioned in the advertising and shopping ecosystems, and CEO Bill Ready is the right leader for oversee Pinterest’s next phase of growth,” Elliott wrote.
Despite the stock move, Pinterest missed estimates for the second quarter on both the top and bottom lines, monthly active users for the period exceeded estimates by 2 million.
— Samantha Subin