The S&P 500 fell deeper into a bear market on Tuesday after setting a new 2022 low, while the benchmark 10-year Treasury yield continued to climb to levels not seen in at least a decade.
The broader market index fell as low as 3,623.29 during the session which broke below the previous bear market intraday low of 3,636 that was set in mid-June. It closed down 0.21% at 3,647.29.
Meanwhile, the Dow Jones Industrial Average fell 125.82 points, or 0.43%, to 29,134.99 — giving up a gain of nearly 400 points earlier in the day. The Nasdaq Composite was up 0.25% to 10,829.50.
The S&P 500 is now 24.3% below its record set in January, while the Dow is 21.2% below its all-time high. The Nasdaq has fallen more than 33% since hitting a record in November.
The 10-year Treasury yield surpassed 3.9% as it continued its climb toward 4%.
"The fact that we lost support at both 3900, 3800 and certainly made a beeline to the June lows tells you that the risk-off environment hasn't changed much over the course of the last six weeks," said Art Hogan, chief market strategist at B. Riley Financial.
"We're still concerned that the Fed is going to overdo it and push the economy into recession," Hogan added.
Stocks initially got a boost after Chicago Federal Reserve President Charles Evans signaled some apprehension about the central bank raising rates too quickly to fight inflation. His comments contrasted with several Fed officials who recently expressed no hesitation in backing the central bank's tough stance against rising prices.
The moves come after five straight days of losses for stocks, with the S&P 500 closing at its lowest level since 2020. The Dow dropped more than 300 points on Monday, putting it in a bear market after falling more than 20% below its record high. The 30-stock average also posted its lowest closing level since late 2020.
Close could show if investors believe a market upswing is possible, strategist says
The setting is right for a solid bounce-back in the market, but the true test of the market's resilience will happen when day trading closes, said Quincy Krosby, chief global strategist for LPL Financial.
"The test for the durability of today's market will come as we move towards the close when traders, who have had to navigate perilous markets, either sell into any strength, or who expect this bounce to mimic the monumental bounce the market enjoyed off the June low," Krosby said.
"So far, in early afternoon trading, there's profit taking," she added. However, "That the message from the Fed to 'keep at it' ... suggests that market participants are going to be much more cautious before embracing a bounce and taking it to the next level."
— Alex Harring
Investors have limited viable alternatives to stocks, making a rebound less likely, investing strategist says
A rebound is less likely as investor exposure to equity remains noticeably higher than in previous periods when a bear market gave way to an upswing, according to Willie Delwiche, an investment strategist at All Star Charts.
The strategist said that's because investors have limited viable alternatives to stocks, which makes pulling away from the stock market more difficult than in previous bearish periods, he said.
"You have people holding on tight to their equity exposure, even though they're feeling bad. Part of it that doesn't get a whole lot of attention is that in most environments, if people are feeling bad, and they don't like stocks, there's a place that can go," said Delwiche, who noted bonds, gold and cash as the typical "safe havens."
But those alternatives are also taking hits as bond yields rise, precious metal values slide and the dollar's conversion rates change.
"There isn't that safe harbor that investors can go to," he said. "They're kind of stuck holding equity, even though they don't like it, and then they pay the price for it."
— Alex Harring
Earnings could be next shoe to drop for markets
Several technical indicators show that stocks are at oversold levels, but concern about upcoming earnings reports are keeping some investors and strategists on the sidelines.
Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, said Tuesday that investors still have not priced in bad earnings news even with the S&P 500 hitting new lows.
"Once growth slows, 'peak hawkishness' may provide some relief, but the impact of slowing growth to corporate earnings will follow. In other words, the first leg down in equity markets was largely due to multiple compression; the next is likely to be downward earnings revisions," Goodwin said in a note to clients.
"With so much recent volatility, investors have been asking if bad news isn't already priced in. I'd argue that the market reaction to early earnings releases suggests that slowing economic activity is nowhere near priced in. Earning estimates are likely to continue their decline until we see a bottoming in leading economic indicators. We are not there yet, suggesting volatility ahead for risk assets," she said.
– Jesse Pound
There is now "plenty of value" for stock pickers, BMO Capital Markets says
There are buying opportunities for stock pickers even with markets in turmoil, according to BMO Capital Markets.
"We believe it is also important to note that while there is still plenty of uncertainty in the market, there is now also plenty of value beneath the surface for investors focused on stock picking," BMO's Brian G. Belski wrote in a Monday note.
About two-thirds of S&P 500 stocks, 66%, are trading below their historical forward price-to-earnings multiples, compared to 40% at the end of 2021, the note read.
The real estate, communication services and technology sectors have seen the greatest contractions, of greater than 30%, in their historical forward price-to-earnings multiples this year, compared to the 25% contraction in the S&P 500 over the same time period, according to the note. Meanwhile, utilities and consumer staples saw the smallest declines, falling 4% and 9% each.
BMO pointed out that energy and communication sectors offer plenty of value picks for investors, while utilities have more expensive stocks.
"Contrastingly, 66% of Utilities and 30% of Consumer Staples currently have NTM P/Es in the 80-100 percentile range, suggesting to us that investors should be cautious when looking to these traditional defensives given the extended valuations among many names in these sectors," read the note.
— Sarah Min
Apple, Nvidia limiting market losses
While stocks are still broadly lower, a few big tech names are holding their ground and keeping the selling from getting worse.
Shares of Apple are up 0.3%, while Salesforce is up 0.4%. Semiconductor stocks are also outperforming, with Nvidia up 1%.
As a result, the Nasdaq 100 is down just 0.3% for the day, outperforming the S&P 500 and Dow.
— Jesse Pound
Here are the stocks making the biggest moves midday
These companies are among those making the biggest moves midday:
- Ford Motor — Shares of Ford shed about 2% after the automaker said it is spending $700 million on a new investment and creating 500 additional jobs in Kentucky to support a new F-Series Super Duty pickup truck.
- FLEETCOR Technologies — The global business payment company's stock dropped 3%, a day after announcing its CFO was leaving the company after 22 years.
- Hertz — Shares of Hertz rallied more than 1% after the rental car company announced a partnership with BP's electric vehicle charging unit that will put thousands of charging stations at Hertz locations.
— Michelle Fox
U.S. 10-year yield closes in on key 4% level
The 10-year Treasury yield is edging close to 4%, a level it has not touched since 2010.
The U.S. 10-year is the benchmark yield that sets the course for home mortgage rates and other consumer and business loans. It has bounded higher this week, as U.K. gilt yields race higher and on expectations of an aggressive Federal Reserve.
The yield was at 3.96% in afternoon trading. The 10-year yield reversed an earlier decline and gained about basis points. (A basis point equals 0.01 of a percentage point)
"It's definitely been impressive, and I just think no one is yet willing to step in and catch the falling knife," said Ben Jeffery of BMO. He added a lack of liquidity has also been pushing up yields, which move opposite price.
Jeffery said the yield was also moving higher ahead of the 1 p.m. auction of 5-year notes.
He said the 10-year tested the 4% level in 2010. "The last time we were sustainably above 4% was 2008. There's another technical level at 4.10% and then there's not much of note until 4.25%," he said.
— Patti Domm
Ned Davis Research moves to underweight on stocks, considers 'secular bear market'
Investors should not bet on a near-term bounce for stocks, and a medium-term bounce is not assured either, according to Ned Davis Research.
Chief global investment strategist Tim Hayes said in a note to clients on Monday that Ned Davis was switching to underweight in equities and raising more cash.
While the S&P 500 breaking through its previous low for the year could signal more short-term pain for stocks, Hayes said that investors should start considering a more long-term issue in the market.
"With the market's failure to form a bottom top of mind, an increasingly common client question we've been getting is whether equities have entered a secular bear market, comparable to the 1929-1942, 1966-1982 and 2000-2009 periods of negative real returns in equities," Hayes wrote.
The high interest rate environment and growing length of this bear market could signal that stocks are moving into a structurally different environment, according to Hayes.
"It's too soon to answer the secular question definitively, but the secular bear possibility warrants close attention given the changing investment environment this year," he added.
— Jesse Pound
Dow reverses a 398-point gain as Tuesday's bounce attempt fails
The three major indexes wiped out earlier gains around noon ET and turned negative.
At its highest level, the Dow Jones Industrial Average was up just over 398 points. The 30-stock index shed those gains and slipped more than 200 points by 12:23 p.m.
Similarly, the S&P 500, which was up as much as 1.7% earlier in the session, slumped nearly 0.7%. The decline dragged the broad market index to a fresh intraday low for 2022: 3,626.16
The Nasdaq Composite also slid by 0.5%, after rising more than 2% earlier in the day.
S&P 500 falls to new low for 2022
The S&P 500 notched a new low this year after breaking below the June intraday low of 3,636.87. It was last down at 3,626.24.
The broader market index was up as much as 62 points earlier in the day, or up 1.71%, before giving back all its gains.
— Sarah Min
Cruise lines outperform
Cruise line stocks were the leading outperformers on the S&P 500 following news that Canada would drop Covid-19 travel restrictions starting next month.
Royal Caribbean Group was the best performing stock on the broader market index, up 7.4%. Shares of Norwegian Cruise Line Holdings jumped 6.9%, and Carnival rose 6.7%.
Those moves boosted the consumer discretionary sector, which advanced 1.7% and was among the leading sectors in the S&P 500.
— Sarah Min
Stocks come off opening highs after 2-year Treasury yield pares back losses
Stocks came off their opening highs after the 2-year Treasury yield pared back losses from earlier Tuesday morning.
The Dow Jones Industrial Average was up 156 points, despite climbing more than 300 points shortly after the open, as bond yields came off their lows.
The policy-sensitive 2-year Treasury yield was down about 1 basis point, after easing sharply earlier, to top 4.29% at around 10:15 a.m. ET.
Bond yields surged this week as traders digested the Federal Reserve's interest rate hikes and weighed economic commentary.
— Sarah Min
Cryptocurrencies climb as dollar pulls back
Crypto prices rose Tuesday morning, helped by a slight pullback in the dollar, after the dollar index climbed to its highest level in about 20 years the day before.
Bitcoin climbed about 5%, according to Coin Metrics, topping $20,000 level and hitting its highest level in more than a week. Ether was last higher by about 4%.
The dollar index, which tracks the greenback against a basket of currencies, is up more than 18% this year. Bitcoin moves inversely to the dollar, so a strong greenback is negative for bitcoin. The stock market bounced on Tuesday too after five straight days of losses. Cryptocurrencies are still highly correlated with stocks, especially tech stocks.
Bitcoin is still struggling to break out of its tight trading range, however. It has been floating between $18,000 and $25,000 since mid-June.
— Tanaya Macheel, Arjun Kharpal
Lucid jumps after Cantor Fitzgerald rates automaker at overweight
Shares of electric vehicle company Lucid popped more than 5% in early trading after Cantor Fitzgerald initiated coverage of the stock with an overweight rating. Cantor analyst Andres Sheppard wrote that Lucid's cars exhibit longer range and faster charging than its competitors, giving it a key advantage.
Lucid was a hot stock in 2021, surging above $55 per share last November around the launch of its first vehicle, the Lucid Air. However, the stock has underperformed dramatically since then and closed at just $14.06 per share on Monday, as investors have largely turned their backs on early stage companies.
— Jesse Pound
Stocks open higher
Stocks rose Tuesday, as the Dow Jones Industrial Average and S&P 500 bounced back from their lowest closing levels in nearly two years.
The Dow Jones Industrial Average advanced 328 points, or 1.1%. The S&P 500 gained 1.5%, and the Nasdaq Composite rose 2%.
— Sarah Min
Home prices in July cooled at the fastest rate in the history of S&P Case-Shiller Index
Home prices continued to cool at a fast pace in July, though they're still higher than they were a year ago. Prices nationally rose 15.8% over July 2021, and while that is a wide gain, it was well below the 18.1% gain in the previous month, according to the S&P CoreLogic Case-Shiller Indices.
The 10-City composite rose 14.9% year over year, down from 17.4% in June. The 20-City composite gained 16.1%, down from 18.7% in the previous month. July's year-over-year gains were lower compared with June in each of the cities covered by the index.
"July's report reflects a forceful deceleration," wrote Craig J. Lazzara, managing director at S&P DJI in a release, noting the difference in the annual gains in June and July. "The -2.3% difference between those two monthly rates of gain is the largest deceleration in the history of the index."
— Diana Olick
Bank of America says clients are shifting into defensives
Bank of America said clients snapped up health care and other defensive stocks as markets stumbled in recent weeks.
Health care stocks saw the fifth largest inflow in Bank of America's weekly history going back to 2008, according to a Tuesday note. The sector reported the biggest inflows of the past six weeks after posting outflows for the majority of this year.
"Defensive sectors in aggregate have seen inflows the last six weeks vs. cyclical sector outflows in five of the last six weeks (a reversal vs. most of this year)," Jill Carey Hall, equity and quant strategist at Bank of America, wrote in a Tuesday note.
Investors piled into communication services, technology and utilities in addition to health care. They sold stocks in seven sectors led by consumer discretionary, energy and financials.
— Sarah Min
Fed's Evans is getting nervous about central bank raising rates too fast
Chicago Federal Reserve President Charles Evans said he's worried the central bank is raising rates too far, too fast.
Evans, who is set to retire next year, said there is not much time to look at monthly releases to see the impacts of each current rate hike before the future one comes. The Fed has set three consecutive, 75 basis point rate hike increases, while indicating plans for future rate hikes, as it tries to cool inflation running near four-decade highs.
"There are lags in monetary policy and we have moved expeditiously," he told "Squawk Box Europe." "We have done three 75 basis point increases in a row and there is a talk of more to get to that 4.25% to 4.5% by the end of the year, you're not leaving much time to sort of look at each monthly release."
— Alex Harring
Tech stocks outperform in premarket trading
Markets got a boost from technology stocks in Tuesday premarket trading as rate spikes eased.
Mega-cap tech stocks led the way higher. Apple advanced 1.5%, Microsoft was up 1.2%, Google-parent Alphabet jumped 1.5% and Amazon rose 1.9%.
Semiconductors outperformed in the premarket. Shares of Nvidia were up nearly 2%. Intel climbed 1.6%. Broadcom rose 1.7%.
— Sarah Min
Here are the stocks making the biggest moves premarket
These companies are making headlines before the bell:
- Keurig Dr Pepper — The consumer stock fell 1.5% premarket after Goldman Sachs downgraded the stock to neutral from a buy rating. The Wall Street firm said it sees increased risk to Keurig's margins as commodity inflation, especially related to coffee, remains elevated.
- Lucid Group — Shares of the electric vehicle player jumped 2.7% in premarket trading after Cantor Fitzgerald initiated coverage with an overweight rating. The firm said Lucid's luxury and premium vehicles provide greater efficiency, longer range, faster charging and more space relative to its peers.
— Yun Li
Oil rises after tumbling to lowest level since January
Oil prices were modestly higher Tuesday morning after crude tumbled to its lowest level since January during the prior session.
Supply cuts in the Gulf of Mexico supported prices Tuesday morning. BP and Chevron have both announced production shut-ins as Hurricane Ian barrels down.
WTI fell to a session low of $76.49 during Monday trading, a price last seen on Jan. 4. Several factors have weighed on prices, including the stronger dollar as well as recession fears.
— Pippa Stevens
British pound bounces after hitting record low, dollar dips
The British pound rebounded Tuesday, trading more than 1% higher against the dollar at $1.083 a day after hitting a record low against the U.S. currency. The move comes as traders awaited clarity on UK monetary policy, with many calling for aggressive rate hikes to stabilize pound.
"The Bank of England's Monday pledge that 'the MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term' failed to reassure investors hoping for an emergency rate hike," BCA Research said in a note.
The U.S. dollar, meanwhile, dipped 0.4% against a basket of currencies.
European markets nudge higher after choppy start to the week
European markets were slightly higher on Tuesday as stocks attempted to rally after choppy trade at the start of the week.
The pan-European Stoxx 600 was 0.6% higher by early afternoon in London, having earlier given back gains of around 1.3% during a volatile session. Travel and leisure stocks added 1.7% to lead gains while banks slipped 0.4%.
Close attention remains on the pound and U.K. bond markets after a historic sell-off on the back of British Finance Minister Kwasi Kwarteng's fiscal policy announcements on Friday.
Both the U.K. Treasury and the Bank of England attempted to assuage concerns on Monday after a tumultuous market reaction.
- Elliot Smith
Fed's Mester says it is better to act 'aggressively' against high inflation
U.S. inflation is "unacceptably high" and uncertainties make monetary policy decisions "not trivial," said Cleveland Fed President Loretta Mester in prepared remarks at the Massachusetts Institute of Technology.
"When there is uncertainty, it can be better for policymakers to act more aggressively," she said. "Aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about."
She said she will be "very cautious" when assessing inflation data.
"I will need to see several months of declines in the month-over-month readings," she said. "Wishful thinking cannot be a substitute for compelling evidence."
CNBC Pro: Analysts like Nvidia once again, with Citi giving it almost 100% upside
Analysts are once again starting to get bullish on Nvidia, after the semiconductor giant lost favor amid geopolitical tensions and a slowdown in the chip sector.
Citi and JPMorgan both said last week that solid demand in PC gaming, as well as cloud adoption in data centers, were set to be tailwinds for Nvidia.
So how much upside did they each give Nvidia shares? CNBC Pro subscribers can read more here.
— Weizhen Tan
Oil, U.S. dollar diverge
For the first half of 2022, the price of oil and the U.S. dollar both rose sharply. However, that has changed in recent weeks, with notable moves for both on Monday.
The Dollar Index rose as high as 114.527 on Monday, hitting its highest level since 2002.
Meanwhile, futures for West Texas Intermediate crude fell 2.58% to $76.08 per barrel. That is the U.S. benchmark's lowest settle since Jan. 3, meaning nearly all of oil's year to day gains have been erased.
— Jesse Pound, Christopher Hayes
Futures open flat
Stock futures opened flat at 6 p.m. in New York, with futures for the Dow, S&P 500 and Nasdaq 100 changed by less than 0.1%.
— Jesse Pound
S&P 500 hits new low for the year
The S&P 500 close at 3,655.04 on Monday, its worst mark since Dec. 14, 2020. The broad market average did avoid breaking its intraday low for the year, but could test that level again on Tuesday.
Here are some other key stats about Monday's session:
- The S&P 500 fell 1.03% and notched its first five-day losing streak since July.
- Ten of 11 Sectors were negative in today's session, led to the downside by Real Estate, down -2.63%. Consumer Staples finished marginally higher.
- The Dow fell -1.11% for its worst close since Nov. 12, 2020.
- The Nasdaq Composite fell 0.60% and is more than 33% below its record high.
- SPDR S&P 500 (SPY) traded 91.9M shares, above its 30-day average volume of 77.8M shares.
— Jesse Pound, Christopher Hayes