Momentum from Bear Market Bounce Fails Again…..

U.S. equities finished solidly to the downside, reversing earlier gains, as the markets continue to struggle to keep the positive momentum from bouncing off bear market lows. Growing recession concerns remain the main culprit, as the Fed and other global central banks tighten policy in response to persistent inflation pressures. In economic news, June Consumer Confidence fell short of forecasts, while regional manufacturing activity deteriorated, housing prices continued to rise, the trade deficit narrowed, and wholesale inventories increased. Treasuries were little changed, and the U.S. dollar rebounded from a recent decline. Meanwhile, crude oil prices were higher, and gold dipped. In equity news, Dow member Nike reported stronger-than-expected quarterly results, but its China sales slumped, while a number of major banks announced dividend increases following the 2022 stress tests. Europe gained ground in most regions, and Asia finished mostly higher, with the global markets aided by continued easing of China COVID restrictions.

The Dow Jones Industrial Average fell 491 points (1.6%) to 30,947, the S&P 500 Index decreased 79 points (2.0%) to 3,822, and the Nasdaq Composite declined 343 points (3.0%) to 11,182. In moderate volume, 4.2 billion shares of NYSE-listed stocks were traded, and 5.3 billion shares changed hands on the Nasdaq. WTI crude oil rose $2.19 to $111.76 per barrel. Elsewhere, the gold spot price decreased $4.40 to $1,820.40 per ounce, and the Dollar Index gained 0.5% to 104.47.

The equity markets remained volatile as they wrestle with an aggressive Fed, which has signaled that restoring price stability is its number one goal and conceding that the path to a soft landing has become “more challenging.”

Home prices continue to rise but Consumer Confidence falls again…..

The Conference Board’s Consumer Confidence Index decreased to 98.7 in June from May’s 103.2 level, and versus the Bloomberg estimate calling for a reading of 100.0. The overall index was hampered by the Expectations Index of business conditions for the next six months portion of the index, which decreased sharply to 66.4 from May’s 73.7 level, while the Present Situation Index portion of the survey declined to 147.1 from the previous month’s 147.4 level. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—increased slightly to 39.7 from the 39.5 level posted in May.

The Richmond Fed Manufacturing Activity Index surprisingly fell deeper into contraction territory (a reading below zero) for June, plunging to -19 from May’s -9 reading, and well below forecasts for a reading of -7. New order volume and shipments dropped further into contraction territory, while prices paid decelerated but remained severely elevated.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 21.2% y/y gain in home prices in April, above the Bloomberg consensus estimate of an 21.1% rise. Compared to the prior month, home prices were up 1.8% on a seasonally adjusted basis, compared to forecasts of a 1.9% gain.

The advance goods trade balance showed that the May deficit narrowed more than expected to $104.3 billion, versus estimates calling for it to contract to $104.8 billion from April’s upwardly-revised shortfall of $106.7 billion.

Preliminary wholesale inventories rose 2.0% month-over-month (m/m) for May, compared to expectations of a 2.1% gain, and versus April’s upwardly-revised 2.3% increase.

Treasuries are little changed after last week’s decline as action in the bond markets remains choppy. The volatility has come as the markets grapple with the economic implications of an aggressive Fed to fight persistent inflation, with recession uncertainty rising. Financial conditions have tightened amid the uneasiness and market skittishness has been exacerbated by the prospect of the Fed tightening policy amid the backdrop of a slowing economy.

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