Markets Lose Steam Late-Day Amid Palpable Caution…..

U.S. equities tumbled in the final hours of trading, as investors appeared overly cautious ahead of tomorrow’s key read on consumer prices. Meanwhile, the unofficial kickoff of Q2 earnings season, with the big financial institutions getting the ball rolling, also appeared to keep sentiment restrained. Recession fears continue to be elevated due to tightening monetary policy across the globe, and as the recent inversion of the Treasury yield curve remains intact. On the equity front, PepsiCo was higher after beating the Street’s forecasts and upping its guidance, and Peloton was in focus following news that it will outsource all of its manufacturing. In economic news, small business optimism fell to its lowest level since 2013, and the percentage of small businesses expecting conditions to improve over the next six months tumbled to the lowest level in the survey’s history. Treasuries rose to push yields lower, and the U.S. dollar nudged higher in choppy action to remain near 20-year highs. Crude oil prices plunged, and gold also lost ground. Europe finished mixed as the euro hovers near parity with the U.S. dollar, and Asia was mostly lower amid renewed COVID concerns and shutdowns in China.

The Dow Jones Industrial Average lost 193 points (0.6%) to 30,981, the S&P 500 Index decreased 36 points (0.9%) to 3,819, and the Nasdaq Composite fell 108 points (1.0%) to 11,265. In moderately-light volume, 3.8 billion shares of NYSE-listed stocks were traded, and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil plunged $8.25 to $95.84 per barrel. Elsewhere, the gold spot price was $8.30 lower at $1,723.40 per ounce, and the Dollar Index inched 0.1% higher to 108.10.

Small business optimism falls below 2020 levels…..

The National Federation of Independent Business (NFIB) Small Business Optimism Index for June fell to 89.5 from May’s 93.1 level, versus estimates of a decrease to 92.5. The index is at the lowest level since early 2013 and posted the sixth consecutive month below the 48-year average of 98, with small businesses expecting better business conditions over the next six months decreasing to a net negative 61%, the lowest level recorded in the survey’s history.

The NFIB said, “On top of the immediate challenges facing small business owners including inflation and worker shortages, the outlook for economic policy is not encouraging either as policy talks have shifted to tax increased and more regulations.”

Treasuries were higher with yields seeing pressure, continuing last week’s rebound. Markets will be tuned into key June inflation reports that are due out later this week, as inflation has driven the Fed to get aggressive with its monetary policy. The yield on the 2-year Treasury note was down 2 basis points (bps) to 3.04%, while the yields on the 10-year note and 30-year bond declined 3 bps to 2.96% and 3.15%, respectively.

©2022 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.