US Stocks were down sharply for a second day Tuesday, as investors prepare for the June inflation data, and digest Bloomberg’s CPI estimates, which predict it will be the hottest print yet.
In commodities, oil prices continued to drop, and in currencies, the dollar and the euro continued to inch toward parity.
The S&P 500 and Nasdaq Composite both were down nearly 1%, while the Dow Jones Industrial Average dropped 0.6%, or 190 points. In all three indexes, losses were accelerating in the final hour of trading.
The euro continued its decline, falling to within 1.0004 against the dollar, as investors waited to see if it would drop below parity with the dollar. As inflation wracks Europe, the ECB has been hesitant to act strongly to constrain it, for fear of reducing economic activity and triggering a recession. As a result, as other central banks are acting more aggressively, inflation has continued to reduce the value of the euro relative to other nation’s currencies.
Crude oil dropped more than 8%, to $96 per barrel as fears of a global recession continued to affect traders.
Tamara Basic Vasiljev, senior economist at Oxford Economics, said in a note that all of the stimulatory effects of the financial easing done by central banks in advanced economies have been reversed by this year’s rise in interest rates and decline in the financial markets. Vasiljev goes on to say that the recent decline in commodities probably means inflation has peaked, so financial conditions should improve going forward.
She wrote, “Now that the commodity prices are falling again and inflation peak looks to be within reach it is likely that we are seeing the worst of financial conditions tightening. If so, conditions worsening is dire but the level is still more in favor of [an] orderly slowdown rather than a recession.”
In crypto, Bitcoin again dropped back under $20,000.
Q2 earnings season began this week. PepsiCo (PEP) posted its report before Tuesday’s open. It reported sales beat estimates, and it raised its forecast for the year.
