US stocks fall after weak consumer confidence

US stocks gave up early gains to fall on Tuesday after a weaker-than-expected consumer confidence reading.

What’s happening
  • The Dow Jones Industrial Average DJIA
    fell 185 points, or 0.6%, to 31,253.

  • The S&P 500 SPX
    fell 38 points, or 1%, to 3,862.

  • The Nasdaq Composite COMP
    fell 202 points, or 1.8%, to 11,323.

On Monday, the major indices drifted to a slightly lower close. The S&P 500, which has slipped into a bear market, is down 18% year-to-date.

What moves the markets

The Conference Board consumer confidence index fell to a 16-month low of 98.7 in June as Americans grew concerned about high gas and food prices and the health of the economy. Economists polled by the Wall Street Journal had forecast the index to fall to 100 from a revised 103.2 in May.

“The continued weakness in confidence surveys suggests that a recessionary environment can be self-fulfilling,” said John Lynch, Comerica Wealth Management’s chief investment officer, in emailed comments.

“While cash on household balance sheets and two job offers for every jobseeker support economic activity, inflation has weighed on sentiment and may weigh on spending and investment decisions,” Lynch said. “For equity investors, this has been reflected in the continued leadership of more defensive versus cyclical stocks in the first half of the year.”

Global stocks, particularly travel stocks, rallied early Tuesday, with analysts tying support to measures by the Chinese government, which said it would extend the quarantine period for international travelers and those who have come in close contact with COVID-19 patients. shorten to 10 days from 21 days.

Beijing will also relax its testing requirements for people in quarantine.

Also, six of the largest US banks said they have enough capital to either maintain or increase their dividends to shareholders, having set aside enough to weather the most extreme economic conditions expected in the coming year.

Wells Fargo & Co. WFC
and Goldman Sachs Group Inc. GS
both increased their payouts by 20%, while Morgan Stanley MS
delivered an 11% increase. Bank of America Corp. B.A.C
increased its dividend by 5%, while Citigroup Inc. C
and JPMorgan Chase & Co. JPM
kept their dividend flat.

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US stocks were hurt on Monday after a rise in bond yields. Analysts had expected month- and quarter-end portfolio rebalancing to support equities this week, although doubts remain over the durability of the recovery from recent lows.

“It’s difficult to draw any firm conclusions so close to quarter-end when the rebalancing of flows is clouding the waters,” said Marios Hadjikyriacos, senior investment analyst at XM.

The yield on the BX:TMUBMUSD10Y 10-year government bond rose 1 basis point to 3.205%. Yields and debt prices move in opposite directions.

New York Fed President John Williams said in a television interview that he expected the US economy to experience a slowdown but not a recession as the central bank aggressively tightened monetary policy to curb inflation. Williams said he expected policymakers to debate at their July meeting whether to raise rates by another 50 or 75 basis points, after delivering a 75 basis point hike this month — the largest since 1994.

Data showed that the US trade deficit in goods narrowed 2.2% to $104.3 billion in May.

The S&P CoreLogic Case-Shiller 20-City Index was up 21.2% year over year in April, up slightly from 21.1% the previous month. In April, the 20-month index rose by a seasonally adjusted 2.3%. A separate report from the Federal Housing Finance Agency showed a monthly gain of 1.6%. And over the last year, the FHFA index has increased by 18.8%.

company in focus
  • Nike Inc. NKE shares fell 5.2% after the apparel maker beat earnings estimates but was cautious on margins and China in particular. But Chinese stocks rose after an easing of quarantine requirements in the world’s second largest economy.

  • JetBlue Airways Corp.
    has again increased its offer for discount carriers Spirit Airways Inc.
    as it tries to outbid rivals Frontier Group Holdings Inc.
    JetBlue shares are up 0.5%, Spirit shares are up 1.4%, and Frontier shares are up 2.2% amid upbeat sentiment across the aviation sector. The popular one US Global Jets ETF
    increased by 1.6%.

Other assets
  • The ICE US Dollar Index DXY,
    a measure of the currency against a basket of six major peers, rose 0.5%.

  • Bitcoin BTCUSD
    declined 0.6% to nea5 $20,600.

  • Oil futures rose with US benchmark CL
    up 1.1% to nearly $111 a barrel. Gold Futures GC00
    declined 0.1% to nearly $1,822 an ounce.

  • The Stoxx Europe 600 XX:SXXP
    up 0.7%, while London’s FTSE 100 UK:UKX
    1.3% preferred.

  • The Shanghai Composite CN:SHCOMP
    and Hong Kong’s Hang Seng Index HK:HSI
    both ended up 0.9% higher, while Japan’s Nikkei 225 JP:NIK
    increased by 0.7%.