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Market Snapshot: Dow down 350 points, Nasdaq rebounds as dollar rallies to 19-year high

U.S. stocks trimmed sharp earlier losses Tuesday, but were trading mostly lower as global economic growth fears weigh on sentiment and as the dollar hit a 19-year high. The tech-heavy Nasdaq Composite outperformed, turning positive in afternoon trade, as plunging oil prices weighed on energy shares and inflation expectations.

What’s happening

The Dow Jones Industrial Average
DJIA,
-1.36%

dropped 490 points, or 1.6%, to 30,608, and had been down more than 700 points at its session low.

The S&P 500
SPX,
-0.85%

was down 39 points, or 1%, at 3,785.

The Nasdaq Composite
COMP,
+0.57%

was up 51 points, or 0.5%, to 11,179, after briefly trading higher earlier in the session. The tech-heavy Nasdaq outperformed for most of the session.

Stocks bounced on Friday, but still ended the week with hefty losses after the S&P 500 logged its worst first-half performance since 1970. U.S. equity markets were shut on Monday for the Independence Day holiday.

What’s driving markets

The collapse in oil prices and surge in the dollar’s value to new multi-decade highs against the euro
EURUSD,
-1.58%

were the two main factors driving markets on Tuesday, analysts said. The U.S. crude oil benchmark was down more than 9% Tuesday afternoon. The euro was down 1.7% against the dollar, with a dollar worth more than 1.03 euros.

Treasury yields fell Tuesday, with the rate on the 2-year note
TMUBMUSD02Y,
2.816%

briefly trading above the 10-year yield
TMUBMUSD10Y,
2.797%

as it had twice earlier this year. A prolonged inversion of the Treasury yield curve is seen as a warning signal of potential recession.

Adam Koos, president of Libertas Wealth Management, said stocks were hurting on Tuesday as falling commodity prices reflected fears that the U.S. economy is slowing sharply.

“I think today’s movement in the market is primarily based on fear, we’re going to go into a recession and what sparked that fear is the pull back in energy,” Koos said. He added that “the dollar is sitting at multi-year highs, which is another reason stocks have struggled.”

News reports said the Biden administration may roll back tariffs imposed on some Chinese goods, potentially helping to crimp inflation imported into the U.S. There also was better economic news out of China. The world’s second biggest economy saw its service sector expand in June at the fastest pace in nearly a year.

Looking ahead, equity investors are facing a second-quarter earnings season that poses a risk to stocks as company executives could share more tidbits about a slowing economy.

Analysts polled by FactSet already lowered their expectations for earnings growth during 2022. For the S&P 500, the estimated earnings growth rate for the second quarter of 2022 is 4.1%. If 4.1% is the actual growth rate for the quarter, it will mark the lowest year-over-year growth rate for the index’s members since Q4 2020, according to FactSet.

The Federal Reserve on Wednesday will release the minutes for its June interest rate-setting meeting, while Friday sees publication of the June U.S. nonfarm payrolls report. Both will be eagerly scanned by investors for clues to the likely pace of Fed interest rate rises. See U.S. economics calendar.

In data published Tuesday, U.S. factory orders jumped 1.6% in May in a show of strength among manufacturer, although a more recent survey of of top executives suggests demand might be waning in tandem with a slowing economy.

“The V-shaped [stock market] recovery is dead this time. The past six months have seen the biggest shift in market sentiment in a lifetime and in Q3, the outlook for global companies’ earnings is not good. The bottom of this bear market could arrive later this year or far away as the first half of 2023,” said Steen Jakobsen, chief investment officer at Saxo Bank.

Companies in focus

Tesla Inc.
TSLA,
+0.79%

on Saturday said it sold more than 254,000 cars and SUVs from April through June, an 18% drop from the first three months of this year and well below the pace in last year’s final quarter. Shares of the electric-vehicle maker fell 2.4%.

Exxon Mobil Corp.
XOM,
-4.47%

said in a filing late Friday that it expects a boost of at least $2.5 billion to its bottom line in the second quarter from rising prices for oil and gas, with billions more coming from higher margins for gasoline and other energy products. Shares dropped 4.3%.

A handful of oil and gas firms were down big: Halliburton
HAL,
-9.16%

ConocoPhillips
COP,
-7.83%
,
Hess Corp.
HES,
-8.17%

and Diamondback Energy
FANG,
-7.35%
.

Other markets

Oil futures slumped, with the U.S. benchmark
CL.1,
-9.09%

down more than 9% to trade below $100 a barrel. Gold futures
GC00,
-2.04%

fell 1.5% to trade below $1,775 an ounce.

Bitcoin
BTCUSD,
+0.65%

fell 3.5% to trade near $19,540.

The STOXX Europe 600
SXXP,
-2.11%

fell 2.1%, while London’s FTSE 100
UKX,
-2.86%

gained 0.9%.

In Asia, Japan’s Nikkei 225
NIK,
+1.03%

rallied 1% to 26,423 and China’s Shanghai Composite
SHCOMP,
-0.04%

closed barely changed at 3,404.

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