All three benchmark U.S. stock indexes ended in the red on Tuesday as investors awaited Federal Reserve Jerome Powell’s testimony in front of Congress.
The Dow Jones Industrial Average finished at 34,053.87, losing 245.25 points or 0.72 percent. The S&P 500, which tracks the top 500 American firms’ performance, closed at 4,388.71 after declining by 20.88 points or 0.47 percent. The Nasdaq Composite fell by 22.28 points or 0.16 percent to conclude the session at 13,667.29.
Analysts say Powell’s testimony before politicians on Wednesday and Thursday may be a “potential market mover.” Investors will look for clues about the central bank’s future policy outlook, especially regarding how long the Fed will maintain its high benchmark rate. The federal fund rate now sits at 5.00 to 5.25 percent, the highest in nearly two decades.
Convera senior market analyst Joe Manimbo said a “hawkish” statement from Powell could boost the U.S. dollar. On the other hand, financial markets will see a decline in risk appetite among investors.
“If Mr. Powell remains adamant that the central bank is not done raising interest rates to crush inflation, that could help the dollar stabilize after the big declines we saw last week.”
Joe Manimbo, Convera senior market analyst
Ten of 11 major sectors within the S&P 500 declined on Tuesday. Consumer discretionary, the only gainer for the day, rose by 0.75 percent to 1,308.39. The energy sector was the biggest loser within the index, falling by 2.29 percent to 602.31. Analysts maintain that the decline in oil prices contributed to the sector’s performance.
Electric vehicle producers Tesla and Rivian Automotive jumped by 5.34 percent and 5.51 percent, respectively. Rivian announced that it would adopt Tesla’s charging standard in its vehicles and chargers. Meanwhile, Ford and General Motors had already announced Superchargers adoption in their products earlier this year.
Shares of PayPal Holdings rose by 3.70 percent to $68.89 after KKR & Co announced the purchase of the payment processing company’s “buy now, pay later” loans in Europe, which amounted to $43.71 billion.
Nike dropped by 3.57 percent after Morgan Stanley forecasted that the sportswear maker would experience margin pressures due to its inventory glut. Adobe also saw a 1.9 percent decline after a new report suggested that EU antitrust regulators would investigate the software company’s plan to acquire designer platform Figma.
Dice Therapeutics jumped 37.19 percent to $46.44. Its rival, Eli Lilly and Co, announced the acquisition of the pharmaceutical company in an all-cash deal worth around $2.4 billion. On the other hand, FedEx saw a 0.78 percent decline after the logistics company reported its quarterly results. Shares of FedEx dropped further in after-hours trading.
Treasury yields, commodities
U.S. Treasury yields eased as the market expected the Fed to end its rate-hiking campaign soon. The 10-year Treasury bond yield declined by 4.4 basis points to 3.724 percent. BCA Research predicted that the 10-year yield would not reach 3.850 percent for the rest of the year unless there was a “significant” shift in the market.
The two-year yield, which reflects the market’s rate expectations, fell by 3.2 basis points to 4.691 percent. The yield curve between two- and 10-year notes was inverted at -97 basis points, indicating expectations of a recession.
Oil prices also declined on Tuesday. Brent futures for August delivery dropped by 19 cents to trade at $75.90 per barrel. U.S. West Texas Intermediate for July delivery saw a $1.28 decline to $70.50.
Gold also traded near its three-month low ahead of Powell’s testimony. Spot gold fell by 0.7 percent to $1,936.06 per ounce on Tuesday. Gold futures were steady at $1,948.75 on the evening.