Dow leads stocks lower after run of downbeat economic data

Stocks finished lower on Tuesday as a run of downbeat economic data pressured markets on the week’s second trading day.

When the closing bell rang on Wall Street, the S&P 500 was down 0.2%, the Dow off 0.5%, and the Nasdaq was unchanged, falling 0.27 points, or 0.00%.

All three major indexes suffered losses to start the week, with the S&P 500 falling by the most since June 16 while the Nasdaq dropped some 2.6% on Monday. The tech index is closed Monday’s session down about 6% from its most recent high after a 25% rally from mid-June to mid-August.

A busy week for economic data got underway in earnest Tuesday morning, with the preliminary August reading on service sector and manufacturing activity from S&P Global showing a further decline in business activity in the private sector this month.

The report showed service sector activity fell to 44.1, a 27-month low and down from 47.3 the prior month and below the 49.8 that was expected. Any reading below 50 shows contraction in the sector. Manufacturing activity, meanwhile, stayed in modest expansion territory, with the index hitting 51.3, down from 52.2 in July.

Excluding the drop in this index seen between March and May 2020 when the pandemic rocked the global economy, Tuesday’s data signaled the sharpest decline in output in 13 years.

“August flash PMI data signaled further disconcerting signs for the health of the US private sector,” Siân Jones, senior economist at S&P Global Market Intelligence, said in a statement on Tuesday. “Demand conditions were dampened again, sparked by the impact of interest rate hikes and strong inflationary pressures on customer spending, which weighed on activity. Gathering clouds spread across the private sector as services new orders returned to contractionary territory, mirroring the subdued demand conditions seen at their manufacturing counterparts.”

At 10:00 a.m. ET, reports on new home sales and the Richmond Fed’s manufacturing index were released and both missed consensus expectations.

The Richmond Fed’s report showed a decline in activity during August, registering a reading of -8 against expectations for a reading of -2.

The pace of new home sales also plummeted in July, falling 12.6% from the prior month to an annualized pace of 511,000 homes. At the current rate of new home sales, there are 10.9 months of supply on the market; in July 2021, there were just 6 months of supply on the market.

Investors were also eyeing currency markets on Tuesday, with the euro again falling below parity — or a 1:1 ratio — with the dollar.

In commodities markets, crude oil futures were rising, with the WTI crude trading up nearly 4% to around $93.60 per barrel. On Monday, energy had a particularly volatile session with WTI futures trading below $87 at one point before headlines out of Saudi Arabia suggested potential production cuts could be on the table from OPEC+.

Investor attention has also turned to the natural gas market in recent days, as investor preparations for an energy crunch in Europe this winter have sent natural gas prices towards 14-year highs. Natural gas futures, however, fell about 4% on Tuesday.

Bitcoin (BTC-USD), which fell about 8% at the end of last week as its own summer rally stalled, was little-changed early Tuesday to trade near $21,400.

On the individual stock side, investors continue to watch the situation at AMC (AMC), which fell 42% on Monday as the company’s new preferred shares, which trade under the ticker, APE (APE), began trading. In afternoon trade on Tuesday APE shares were up 17%, while AMC shares were down 8%.

Earnings continue to trickle out, with shares of Macy’s (M) up 3.7% on Tuesday after the retailer reported a better than expected quarter. The company did, however, lower its full-year outlook, citing, “the risk [Macy’s] sees in the continued deterioration of consumer discretionary spending in some of its categories and the level of inventory within the industry, as well as risks associated with a more pronounced macro downturn.”

The Macy’s logo is displayed at a Macy’s store on May 26, 2022 in Los Angeles, California. (Photo by Mario Tama/Getty Images)

Zoom (ZM) shares fell 16.5% on Tuesday after the company lowered its outlook in quarterly results posted last night.

The video conferencing giant now expects full-year revenue to total around $4.4 billion, down from prior forecasts of closer to $4.6 billion. In its most recent quarter, the company reported sales from 7.6% from the prior year period, which Bloomberg notes is the company’s slowest growth on record.

Zoom is perhaps the poster child for pandemic-era trades that have completely reversed. Bespoke Investment Management’s George Pearkes noted Monday the company’s market cap has fully round-tripped from pre-pandemic levels, sitting at around $29 billion after Monday’s report, down from a peak in late-2020 of $200 billion.

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