Tuesday July 12th

U.S. stock index futures fell Tuesday as worries over global economic growth dented investor appetite for risk assets and Wall Street looked ahead to the start of what could be a difficult earnings season. Dow Jones Industrial Average futures slipped by 181 points, or 0.58%. S&P 500 futures dipped 0.32% and Nasdaq 100 futures rose 0.24%. Investors appeared to be shunning riskier assets such as stocks in favor of traditional safe havens such as U.S. Treasurys and the dollar. The 10-year Treasury yield fell 7 basis points to 2.92%. The dollar index, which measures the U.S. currency’s performance against six other currencies, popped 0.5% to 108.51. That gain put the euro on the brink of parity with the dollar, as recession fears grow in Europe. The dollar index has been on fire this year, rising 13% in that time. Several Wall Street strategists have warned that this strength in the U.S. currency could spell trouble for corporate earnings ahead. “The surging USD is a symptom of global unease and will make life even more difficult for Corporate America (the EPS headwind from FX is going to be enormous) and int’l central banks (as the slumping EUR, GBP, etc., adds to the inflationary pressures in the EU and UK),” wrote Adam Crisafulli of Vital Knowledge. PepsiCo kicked off the corporate earnings season Tuesday morning. Shares rose more than 1% in the premarket after the snacks and beverages giant reported a better-than-expected quarterly profit and revenue and raised its revenue outlook for the year. Delta Air Lines and JPMorgan Chase are among the companies slated to report later this week. Market participants will watch for downside risk to earnings forecasts as companies grapple with rising interest rates and greater inflationary pressures, and as Wall Street debates the likelihood of a recession. “In terms of S&P earnings, for instance, we think we’re already moving towards an earnings recession,” Marathon Asset Management’s Bruce Richards said Monday on CNBC’s “Closing Bell.” “Companies are getting squeezed at all sides, they’re getting squeezed on cost of goods and the wages and all things that go into input from our manufacturing goals or services. And on the other end, we think revenues are starting to flatten before turning down at a time when interest cost is going up. ...That’s a lot of downgrades, a lot of potential defaults coming from the system as a result of higher charges.” Inflation is also on investors’ radars this week with June’s consumer price index report set for release Wednesday. The headline inflation number, including food and energy, is expected to rise to 8.8% from May’s level of 8.6%, according to estimates from Dow Jones. Tuesday’s moves followed a downbeat session in which the Dow, S&P 500 and Nasdaq all fell. Japanese stocks led losses in Asia-Pacific markets on Tuesday as risk-off sentiment took hold. The Nikkei 225 in Japan declined 1.77% to close at 26,336.66, while the Topix index fell 1.64% to 1,883.3. Hong Kong’s Hang Seng index slid 1.13% in late afternoon trade, and the Hang Seng Tech index lost 1.88%. Mainland China markets were on track for two days of declines as fears of stringent Covid measures emerged. The Shanghai Composite was 0.97% lower at 3,281.47, while the Shenzhen Component slipped 1.41% to 12,439.27. South Korea’s Kospi shed 0.96% to end the day at 2,317.76 and the Kosdaq lost 2.12% to 750.78. Oil prices fell on Tuesday as fresh Covid-19 curbs in China, the world’s biggest crude importer, and fears of a global economic slowdown weighed on the fuel demand outlook. Brent crude futures for September fell $4.86, or 4.5%, to $102.24 per barrel while U.S. West Texas Intermediate crude for August delivery was at $99.16, for a loss of 4.7%. Gold steadied on Tuesday after dropping to a nine-month low earlier as investors positioned for U.S. economic data, with a strong dollar and bets for steep interest rate hikes still keeping a leash on non-yielding bullion. Spot gold was $1,738.08 per ounce after hitting $1,722.36 earlier in the session, its lowest since Sept. 30. U.S. gold futures rose 0.3% to $1,737.10. The dollar climbed to a 20-year peak against a basket of major rivals, making greenback-priced gold more expensive for buyers holding other currencies.