US stocks turn lower after weak consumer confidence reading

US stocks gave up early gains to turn lower Tuesday after a consumer-confidence reading came in weaker than expected.

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

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

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

On Monday, major indexes drifted to a modestly lower close. The S&P 500, which has slid into a bear market, is down 18% year to date,

What’s driving markets

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

“The persistent weakness in confidence surveys suggests a recessionary environment can become self-fulfilling,” said John Lynch, chief investment officer for Comerica Wealth Management, in emailed comments.

“While cash on household balance sheets and two job openings for every job seeker are supportive of economic activity, inflation has pressured sentiment and can weigh on consumption and investment decisions,” Lynch said. “For equity investors, this has been reflected in the persistent leadership of defensives relative to cyclicals in the first half of the year.”

Global equities, particularly travel stocks, got a lift early Tuesday, with analysts tying support to moves by the Chinese government, which said it would shorten the quarantine time for international travelers and those who have come into close contact with COVID-19 patients to 10 days from 21 days.

Beijing also wants to loosen its testing requirements for people in quarantine.

Also, six of the biggest US banks said they have enough capital to either maintain or hike their dividends to shareholders after setting enough aside to handle 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 at 11% rise. Bank of America Corp. B.A.C
increased its dividend by 5%, while Citigroup Inc. C
and JPMorgan Chase & Co. JPM
held their dividend flat.

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US stocks were weighed down on Monday after a rise in bond yields. Analysts had been anticipating that month and quarter end rebalancing of portfolios would be supportive of stocks this week, though doubts about the durability of the bounce off recent lows remain.

“It is difficult to draw any concrete conclusions so close to quarter end, when rebalancing flows are muddying the waters,” said Marios Hadjikyriacos, senior investment analyst at XM.

The yield on the 10-year Treasury note BX:TMUBMUSD10Y was up 1 basis point at 3.205%. Yields and debt prices move opposite each other.

New York Fed President John Williams, in a television interview, said he expected the US economy would see a slowdown but not a recession as the central bank aggressively tightened monetary policy in an effort to rein in inflation. Williams said he expected policy makers to debate whether to hike rates by another 50 or 75 basis points when they meet in July, after delivering a 75 basis point increase this month — the largest since 1994.

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

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

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

  • JetBlue Airways Corp.
    JBLU
    once again raised its offer for discount carriers Spirit Airways Inc.
    SAVE
    as it attempts to outbid rival Frontier Group Holdings Inc.
    ULCC.
    JetBlue shares rose 0.5%, Spirit shares gained 1.4% and Frontier shares were up 2.2% amid a positive tone across the airline sector. The popular US Global Jets ETF
    JETS
    rose 1.6%.

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

  • Bitcoin BTCUSD
    was down 0.6% nea5 $20,600.

  • Oil futures rose, with the US benchmark CL
    up 1.1% near $111 a barrel. Gold futures GC00
    were off 0.1% near $1,822 an ounce.

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

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

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