The Dow Jones Industrial Average and S&P 500 closed lower, clinching their worst daily performance in nearly a month on Tuesday as anxieties about a looming Federal Reserve decision and a flurry of big-tech earnings undercut stocks.
What stocks performed
The Dow Jones Industrial Average
fell 228.50 points, or 0.7%, to end at 31,761.54, its largest one-day point and percentage decline since June 30, according to Dow Jones Market Data.
The S&P 500
shed 45.79 points, or 1.2%, closing at 3,921.05.
The Nasdaq Composite
lost 220.09 points, or 1.9%, to finish at 11,562.57, ending lower for third straight day.
On Monday, the Dow rose 91 points, or 0.3%, while the S&P 500 ticked up 0.1% and the Nasdaq Composite lost 0.4%.
What drove markets
Stocks opened lower after Walmart Inc.
late Monday cut its profit outlook, saying inflation on food had caused it to conduct more markdowns in apparel. Shares fell 7.6% Tuesday, while other retail stocks also sunk. The SPDR S&P Retail ETF
closed 4.2% lower.
The retailing giant’s insight into how inflation has been constraining consumption rattled markets by offering more cold, hard evidence that the engine of the U.S. economy — consumer spending — has been constrained by inflation.
“You have this anecdotal data and this view that things are slowing, but until it hits you in the face, then it becomes very clear, and then you have to reassess. I think we’re in ‘reassess’ mode right now,” said Eric Merlis, co-head of global markets at Citizens.
As U.S. stocks fell to lows of the session in afternoon trading, analysts blamed jitters ahead of earnings reports due from some of the biggest American tech companies, many of which were reporting Tuesday, or later in the week.
Anxieties ahead of the earnings reports appeared to contribute to Tuesday’s losses, Merlis said.
“There’s concern advertising spending will be much weaker,” he added, in reference to digital advertising heavyweights Alphabet and Meta.
Meta shares fell 4.5% Tuesday, while those of Amazon were down 5.2%. The weakness in megacap tech Tuesday helped drive the Nasdaq to underperform the S&P 500 and the Dow.
Consumer discretionary shares — an S&P 500 sector that’s dominated by Amazon and Tesla Inc.
— were the worst performer among the S&P 500’s 11 sectors, while defensive stocks like health-care and utilities were the only S&P 500 sectors in the green, according to FactSet data. Tesla shares shed 3.6%.
Adding to the gloom outlook, the International Monetary Fund warned Tuesday that the global economy is facing the possibility of a severe downturn that would rank in the bottom 10% of outcomes since 1970.
In an update to its closely-followed World Economic Outlook report, the IMF trimmed its baseline forecast for global economic growth to 3.2% in 2022, 0.4 percentage point lower than in the April report (where it also cut its guidance). In 2023, the IMF projected global output at just 2.9%.
For the U.S., the IMF is projecting 2.3% growth this year, down 1.4 percentage points from the April forecast. For 2023, the IMF is now projecting a slim 1% growth rate, down 1.3 percentage points from April.
Meanwhile, the Federal Reserve started its two-day interest-rate-setting meeting Tuesday, which is expected to conclude Wednesday with a 75 basis point rate increase as the central bank continues to tighten aggressively in its effort to curb inflation.
In U.S. economic data Tuesday, the S&P CoreLogic Case-Shiller 20-city index decelerated to a 20.5% year-over-year gain in May down from 21.2% in the previous month. A separate report from the Federal Housing Finance Agency showed a 1.4% monthly gain. And over the last year, the FHFA index was up 18.3%
The Conference Board said its index of consumer confidence fell to 95.7 in July from a revised 98.4 in the previous month.
U.S. new home sales plunged 8.1% to a seasonally-adjusted rate of 590,000 in June, from a revised 642,000 a month earlier, the Commerce Department reported Tuesday.
But key highlights of the weekly economic data calendar arrive in the coming days, as investors will receive the first reading on second-quarter GDP. According to the Atlanta Fed’s GDPNow forecasting tool, the U.S. economy likely contracted for a second consecutive quarter between the beginning of April and the end of June. The GDP report lands Thursday, then an update from the Fed’s preferred inflation measure, the personal consumption expenditure index, is due out Friday morning.
Companies in focus
Shares of General Motors
fell 3.4% after the car maker’s second-quarter profit fell short of estimates, offsetting a revenue beat.
Shares of United Parcel Service
lost 3.4% Tuesday, despite the package delivery giant reporting second-quarter profit and revenue that rose above expectations and boosting its stock buyback plan by about 50%.
said it would spin off its healthcare business to create two public companies to pursue their growth plans. The new 3M will be a global material science company with a range of industrial and consumer markets, while the healthcare company will focus on wound care, healthcare IT, oral care and biopharma filtration. Shares of the Dow component rose 4.9%.
shares gained 2.7% after the fast-food giant topped Wall Street earnings expectations but fell short on revenue.
- Coca-Cola shared rose 1.6% after beating expectations for adjusted profit and revenue despite cost and currency headwinds.
Shares of General Electric Co.
rose 4.6% after the industrial conglomerate, which plans to split into three independent companies, topped second-quarter profit and revenue expectations and delivered surprise positive free cash flow, while continuing to provide a somewhat downbeat full-year outlook.
is reportedly planning to lay off around 10% of its workforce as it admits that e-commerce growth hasn’t continued as robustly as expected, according to The Wall Street Journal, which cited a memo to staffers. Shares tumbled 14.1%.
Kleenex maker Kimberly-Clark Corp.
reported earnings and revenue that topped estimates. Shares finished 0.4% higher.
The yield on the 10-year Treasury note
declined 3.3 basis points to 2.786% from 2.819% Monday afternoon. Yields and debt prices move opposite each other. The spread between the yield on the 3-month Treasury bill and the 10-year note slumped to 25 basis points, its flattest since early March 2020, according to TradeWeb data.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up 0.6%.
The U.S. oil benchmark
fell 1.8%, to settle at $94.98 a barrel on the New York Mercantile Exchange after trading as high as $99, while gold futures
closed 0.1% lower, finishing down for a second day.
The Stoxx Europe 600
and London’s FTSE 100
ended at modest losses for the day.
The Shanghai Composite
ended 0.8% lower, while the Hang Seng Index
jumped 1.7% in Hong Kong and Japan’s Nikkei 225
edged down 0.2%.