Dow, S&P 500 fall Tuesday, notching three-day losing streak

Stocks end Tuesday lower, S&P 500 and Dow tumble a third day

U.S. stocks slipped on Tuesday as investors prepared for Federal Reserve Chair Jerome Powell’s remarks at Jackson Hole on Friday.

The S&P 500 closed 0.22% lower, ending at 4,128.73, and the Dow Jones Industrial Average slipped 154.02 points to land at 32,909.59. It was the third consecutive day of losses for both indexes. The Nasdaq Composite inched downward by 0.002% to close at 12,381.30.

Darla Mercado

BCA Research highlights 7 risks to its short-term ‘risk on’ call

BCA Research highlighted in a report Monday what it says are seven risks to its recommendation that investors overweight “risk assets in multi-asset portfolios over the next six months.” Notwithstanding threats to its view, BCA bases its short-term bullishness on a belief that “financial markets have prematurely priced in too much pessimism.”

But the two primary risks BCA cites are “unanchored inflation expectations and consumer retrenchment.”

The other five — not ranked in any order of priority — are a renewed Covid outbreak, geopolitical pressures (Ukraine/Taiwan Strait/Iran), consumer credit deterioration, a softer labor market and fleeting technical support from stock price charts, so long as the S&P 500 stayed above 4175.

That last threat to BCA’s “risk on” view re-emerged on the same day as its note, when the S&P 500 closed at 4138, close to its intraday low of 4130 and its worst performance in two months.

Scott Schnipper

Apple looks vulnerable to chart strategists and that could be negative for whole market

Strategists who follow charts say Apple stock looks vulnerable and it could see further pullback after a roughly 5% drop from last Wednesday’s intraday high.

Apple stock was trending sideways Tuesday, but strategists say there could be more selling to come for the stock which has been overbought for weeks.

Any decline in Apple could have implications for the overall market performance, since Apple is 7.4% of the S&P 500, and is also a member of the Dow and Nasdaq.

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“It outperformed the market during the spring correction, and then it outperformed the market off the June lows,” BTIG chief market technician Jonathan Krinsky said. “It’s basically been both a defensive and offensive vehicle, which tells me it’s very overcrowded at this point. And it’s very extended. Any number of technical metrics will tell you it’s very extended. The risk reward is poor.”

Patti Domm

Jim Chanos creates an arbitrage trade for AMC and APE

Jim Chanos has wrapped his head around the new APE dividend from AMC, and he says there is money to be made.

Chanos said on CNBC’s “Halftime Report” that he believes AMC’s common shares and its new APE preferred shares should trade at roughly the same price. As a result, he has bought APE and created a short position against AMC.

That trade, an example of arbitrage, was working on Tuesday. Shares of AMC were down 4%, while APE was up about 18%.

Read more about Chanos trade on CNBC Pro.

— Jesse Pound

Natural gas pulls back after hitting highest since 2008

U.S. natural gas tumbled during afternoon trading Tuesday after Freeport pushed backed the restart date for its LNG facility near Freeport, Texas. The facility, located on Quintana Island, suffered an explosion on June 8.

Freeport said Tuesday that initial production could begin in early to mid-November, which is later than prior forecasts.

Earlier in the session natural gas surged above $10 per million British thermal units for the first time since July 2008.

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— Pippa Stevens

Risk assets could outperform on dovish tone from Powell, investor says

A more dovish tone from Federal Reserve Chair Jerome Powell at Jackson Hole, Wyoming could be a boon to risk assets, according to Michael Creadon, president at Inveniam Defi Devs, a blockchain technology firm, and a former hedge fund CEO from Chicago.

“The big story for the second half of the year is how soon and when and whether the Fed can get inflation under control,” Creadon said. “And to the extent that they’re able to demonstrate softer inflation numbers, that’ll be hugely positive for risk assets.”

“Inflation doesn’t have to go to 2%. But if it can get down to 5% to 6%, with the Fed funds rate at 4%, I think that people will say, ‘you know what, we can live with that.’ We just need to turn the corner on inflation, and then risk assets will likely perform very, very well.”

Investors are deliberating the outlook for growth and tech stocks, which they worry could face pressure should the central bank adopt a more aggressive stance against inflation.

— Sarah Min

Expect further volatility as traders watch Fed, UBS says

Stocks will remain volatile as Wall Street anticipates the Federal Reserve’s next move, according to UBS.

“We expect equity markets to remain volatile as investor sentiment oscillates between hopes that the Fed will succeed in steering the US economy to a ‘soft landing,’ and fears that it will not,” read a Tuesday note from Global Wealth Management Chief Investment Officer Mark Haefele.

The firm recommended investors continue to take a “selective approach” to equities and build resilient portfolios. Investors can add exposure to more defensive sectors such as healthcare, tilt toward value over growth, and position for longer-term trends.

Some long-term trends investors can explore are in green tech, cybersecurity and agriculture, according to the note.

— Sarah Min

Watch these S&P 500 levels, Bank of America says

The S&P 500 failed last week to stay above the 200-day moving average — a level closely watched by traders — as the market’s rally off the mid-June lows ran out of steam.

Now, Bank of America’s Stephen Suttmeier is advising investors watch the following levels to see where the market could find some support:

  • 100-day moving average: 4,090
  • 50-day moving average: 3,969
  • 38.2% Fibonacci retracement level of June-to-August rally: 4,062
  • 61.8% Fibonacci retracement level of June-to-August rally: 3981

The S&P 500 traded around 4,135 on Tuesday.

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Despite the market’s recent setback, Suttmeier reiterated his belief that the S&P 500 is in a “correction within [a] secular bull market.” He noted that: “The 2022 correction may be running its course.”

—Fred Imbert, Michael Bloom

Chip stocks outperform

Semiconductor stocks outperformed in midday trading as a decline in U.S. Treasury yields took some pressure off tech and growth stocks. The tech-heavy Nasdaq Composite was last up 0.26%, and the iShares Semiconductor ETF was 1.3% higher.

Shares of Nvidia, Broadcom and Intel advanced 1.4%, 1.1% and 1%, respectively.

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— Sarah Min

Dan Niles warns of ‘long, punishing journey’ for US economy

Hedge fund manager Dan Niles said on “Tech Check” that he has positioned his portfolio for a U.S. recession.

Niles said that the recent decline in forward earnings estimates would continue in the months ahead and that the Federal Reserve would continue to put pressure on the economy through rate hikes.

“This is going to be a long, punishing journey, as the Fed will probably remind us at Jackson Hole on Friday. They’ve still got to raise rates a lot more,” Niles said.

Niles said that his Satori Fund owns Amazon and Walmart because those companies could gain market share in a recession. On the other hand, the fund is shorting enterprise tech stocks where corporate demand could weaken in a recession.

Overall, Niles said the S&P 500 could get back down to 3,675 or even lower.

— Jesse Pound

Energy jumps 4% as oil prices rise

The S&P 500’s energy sector jumped 4% on Tuesday as oil prices rose after Saudi Arabia hinted at a potential OPEC+ output cut.

Global benchmark Brent crude gained $2.64, rising to $99.12 a barrel. U.S. West Texas Intermediate crude added $2.83, or 3.13%, to $93.19.

Shares of Halliburton, Occidental Petroleum and Diamondback Energy jumped 8%, 7.1% and 5.1%, respectively. Shares of Exxon Mobil, EOG Resources and Pioneer Natural Resources gained more than 3% each.

— Samantha Subin

Occidental jumps again, continuing a Buffett-induced rally

Shares of Occidental Petroleum climbed 8% around midday trading Tuesday, continuing a rally triggered by news that Warren Buffett’s Berkshire Hathaway received approval to buy up to 50% of the oil giant.

Occidental has become one of retail traders’ favorite stocks thanks to the endorsement from Buffett. The stock has been the biggest winner this year on the back of soaring oil prices, rising more than 150% year to date.

— Yun Li

Zoom tanks 14% on forecast cut

Shares of the videoconferencing company plummeted more than 14% after cutting its full-year forecast. Zoom posted an 11-cent earnings beat for the second fiscal quarter but revenue fell short of expectations, weighed down in part by the strong U.S. dollar.

The company said revenue in the recent quarter grew 8% year over year, down from 12% growth. Zoom also said it expects its online business to be down 7% to 8% in the full fiscal year.

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— Samantha Subin

Palo Alto Networks surges on earnings report

Shares of cybersecurity firm Palo Alto Networks jumped 10% during Tuesday’s session after its Monday earnings report.

The company reported quarterly results that beat Wall Street’s expectations on the top and bottom lines, provided strong quarterly and full-year guidance and announced that its board approved a 3-for-1 stock split to take place in September.

In addition, the company expanded its stock repurchase program by $915 million to a total of $1 billion.

Wall Street cheered the results, with a few analysts raising price targets on shares of the company.

—Carmen Reinicke

Dick’s Sporting Goods earnings

Dick’s Sporting Goods beat earnings and revenue expectations in its calendar second-quarter results. The sporting goods retailer also boosted its full-year financial outlook.

The retailer forecasts comparable store sales in 2022 to decline between 6% to 2%, compared to previous estimates between 8% and 2%.

Shares ticked slightly higher during the regular session.

— Sarah Min, Jack Stebbins

Treasury yields reverse course after weak housing and PMI data

Treasury yields turned lower, and the 10-year yield was negative on the day after weaker housing and PMI data.

The 10-year, as high as 3.07% earlier, was just holding 3%, after a report that new home sales fell 12.6% in July, about 10 percentage points more than expected. Yields move opposite price.

“The most rates-sensitive sector of the economy has taken it on the chin as the Fed’s aggressive tightening has taken the wind out of the housing market’s sails,” noted Chris Rupkey, chief economist at FWDBONDS.

Both services and manufacturing PMI report were also below expectations, following weaker reports from Germany and France. Manufacturing PMI was at 51.3, still showing expansion. But the services PMI fell from 47.3 to 44.1, the lowest since May 2020. Below 50 signals contraction.

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A round of weaker data could encourage traders to expect a less hawkish-than-feared speech from Federal Reserve chairman Jerome Powell at the Jackson Hole symposium Friday. Other key data before that speech includes durable goods Wednesday and personal consumption data Friday.

–Patti Domm

Macy’s earnings

Shares surged 7% after the department store chain surpassed second-quarter profit and revenue expectations. Macy’s reported adjusted earnings of $1 on revenue of $5.6 billion. Analysts surveyed by Refinitiv were expecting earnings of 85 cents on revenue of $5.49 billion.

Still, Macy’s cut its full-year forecast, expecting lower consumer spending ahead on discretionary goods such as apparel.

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— Sarah Min, Lauren Thomas

New home sales drop 12.6% in July

Sales of new homes tumbled 12.6% in July, according to data released Tuesday.

That decline brought the sales count to a seasonally adjusted annualized rate of 511,000, below estimates of 574,000. At the same time, supply rose to 10.9 months.

— Samantha Subin, Diana Olick

Bill Ackman hints at U.S. listing of Pershing Square Holdings

Bill Ackman indicated that his Europe-listed Pershing Square Holdings could one day be available on U.S. exchanges, enabling every investor to bet with him.

“We expect to continually evaluate PSH and its operations, and consider whether in the future it may be able to operate not as an investment company in the U.S., but rather as an operating company that could be listed in the U.S.,” Ackman said in his latest investor letter.

PSH, a closed-end equity fund with about $12 billion in net assets, is Ackman’s largest investment vehicle. It trades only on European exchanges, the LSE and Euronext Amsterdam, even though it is managed by a U.S. manager and owns North American headquartered companies. In recent years, PSH has traded at a large discount to its net asset value.

— Yun Li

August PMIs miss expectations

The August flash readings for S&P Global’s purchasing managers index came in weaker than expected on Tuesday.

The services PMI came in at 44.1, and the manufacturing PMI fell to 51.3. Economists surveyed by Dow Jones expected those readings to be 49.0 and 51.9, respectively.

The S&P Global composite PMI fell to 45.0 from 47.7 in July, hitting a 27-month low.

–Jesse Pound

10-year Treasury yield rises in early trading as traders await Powell speech

The closely watched 10-year Treasury yield rose in early trading, as markets anticipate a hawkish tone from the Federal Reserve’s Jackson Hole symposium Friday.

The yield was at 3.06% in morning trading, after rising above the psychological 3% level Monday for the first time in a month. Strategists expect the yield to continue to drift higher ahead of Fed Chairman Jerome Powell’s 10 a.m. speech Friday at the Wyoming conference.

Strategists have been watching the quick move up in yields in the last several sessions as a potential negative for stocks. Tech and growth stocks are particularly hit when yields rise, since they are priced more for future earnings. Those future earnings are worth less in a higher rate environment.

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The 2-year note yield, however, was slightly lower ahead of a 1 p.m. ET auction of $44 billion in 2-year notes.

Treasury yields move opposite price.

–Patti Domm

Stocks open little changed

Stocks opened little changed Tuesday. The Dow Jones Industrial Average rose 2 points, or 0.01%, shortly after the bell. The S&P 500 gained 0.06% and Nasdaq Composite advanced 0.19%.

— Sarah Min

Whistleblower complaint alleges Twitter has ‘extreme’ security and moderation issues

Twitter’s former head of security has alleged that the company has “extreme, egregious deficiencies” related to privacy, security and content moderation.

Peiter “Mudge” Zatko and the nonprofit law firm Whistleblower Aid have filed complaints with several federal agencies, including the Department of Justice.

The allegations include Zatko saying that Twitter CEO Parag Agrawal asked Zatko to provide false and misleading documents.

The complaint comes as Twitter is preparing to go to trial over Elon Musk’s attempt to cancel his takeover offer. Musk’s attorneys said they have issued a subpoena for Zatko.

Shares of Twitter were down more than 3% in premarket trading.

— Jesse Pound, Todd Haselton

Retail trading has picked up, and that could be a boost for Robinhood

August’s re-emergence of the meme stock trade could be a “modest positive” for retail-focused brokerage firm Robinhood, according to Piper Sandler.

“From various industry sources, it is clear that retail engagement has increased over the past few weeks. This should be a modest positive for HOOD as we expect to see activity levels to improve for the eBrokers,” analyst Richard Repetto wrote in a note to clients on Monday evening.

Robinhood has seen its active users decline sharply this year as the pandemic trading boom among retail investors has waned.

The company said last week that it had 13.2 million monthly active users in July, down from 14 million in June and 19.5 million a year ago.

— Jesse Pound

Morgan Stanley Wealth Management says, “This bear in our view has one last act”

Stocks may have pared back losses from their June lows, but Morgan Stanley Wealth Management believes there is further downside from here.

“[We] feel strongly that the bear market has not ended,” read a note from the firm’s global investment committee led by CIO Lisa Shalett.

Investors are underestimating inflation, growing recession risks, and the likelihood that earnings expectations will have to come down, according to the note.

“We view earnings risks as potentially delayed but not denied. Rising costs, slowing growth, strong-dollar headwinds, bulging inventories and loss of pricing power could drive disappointment. We see expectations for 2023 profits resetting by the start of the fourth quarter,” read the note.

“This bear in our view has one last act.”

— Sarah Min

Zoom Video gets downgrade after cuts to full-year outlook

Zoom Video reported mixed quarterly results and cut its full-year outlook, leading BTIG to downgrade the video conferencing company.

“Overall, the pullback in FY23 profitability and FCF is somewhat concerning as topline growth slows further, and thus we are downgrading shares of ZM to Neutral given significantly reduced near-term expectations,” analyst Matt VanVliet said.

CNBC Pro subscribers can read the full story on this downgrade here.

Fred Imbert

U.S. stocks will be challenged in the next nine to 18 months, fund manager says

U.S. markets might suffer in the coming months as a result of quantitative tightening by the Fed, Mary Nicola of PineBridge Investments told CNBC’s “Street Signs Asia.”

It means the U.S. central bank will likely continue reducing its balance sheet, which lowers liquidity in financial markets.

The Fed has been removing cash from the system that was pumped into the economy when the pandemic first started, and is expected to continue to do so even if the pace of rate hikes slows.

“We’ve seen such a rapid response and such aggressive returns from the markets as a result of balance sheet expansion,” the portfolio manager said. “Now that we’re seeing a tightening … in balance sheet, that’s where we’re concerned about financial markets.”

“Over the next nine to 18 months, you know, we think that equities are going to be challenged. So we’ve been taking a more cautious stance on equities overall and on risk assets.”

— Abigail Ng

European markets drift lower at the open

The Euro Stoxx 600 Index slipped 0.3% in early deals with media stocks the biggest laggard. Shipping firm Maersk saw its shares dip 2.7% after a price target cut for Citi.

Oil stocks rose by 1% after some steady buying in the commodity markets on Monday afternoon. Both WTI and Brent crude were higher for the session on Tuesday morning.

Read more here.

—Matt Clinch

CNBC Pro: Tech investor Gene Munster reveals why this FAANG stock can top $250

FANNG stocks have rallied strongly in the second half of the year, but tech investor Gene Munster believes one stock could still see further upside ahead.

He tells CNBC why he loves this stock for the “next two to five years.”

Pro subscribers can read the story here.

— Zavier Ong

Markets have not seen peak Fed hawkishness, says Veritas Financial’s Branch

Veritas Financial Group’s Greg Branch believes markets have yet to experience peak hawkishness from the Federal Reserve.

“What we should be worried about is that this level and this persistency of inflation by all accounts is going to persist from the data that we’re seeing, and so what that means is that we haven’t seen peak Fed hawkishness at least at this point,” Branch told CNBC’s “Closing Bell: Overtime” on Monday.

According to Branch, the slowdown during the second half of the year is likely going to be deeper and longer than many investors and analysts anticipated in January when calls for a recession mounted. He also expects the Fed’s September rate hike to exceed 50 basis points.

— Samantha Subin

Where Monday’s moves put the major averages for August

Following Monday’s sell-off here’s where the major averages stand for August:

The Dow:

  • Up 0.67% for the month, 10.52% off its 52-week high

The S&P 500:

  • Up 0.19% in August, 14.12% off its 52-week high

The Nasdaq Composite:

  • Down 0.07% this month, 23.63% off its 52-week high

— Samantha Subin

Zoom shares tumble 9% on revenue miss, weak outlook

Zoom shares dropped about 9% in extended trading on Monday after missing revenue estimates in the recent quarter and cutting its outlook.

The video conferencing company’s earnings came in at $1.05 a share on $1.10 billion in revenue, while analysts had anticipated 94 cents per share on revenues of $1.12 billion. At the same time, Zoom shared disappointing guidance for the current quarter and the full year.

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— Samantha Subin

Palo Alto Networks jumps about 9% on earnings beat

Shares of the cybersecurity company surged nearly 9% after posting a beat on the top and bottom lines in its fiscal fourth quarter. Palo Alto Networks beat earnings expectations by 11 cents a share on revenues of $1.55 billion.

The company also issued upbeat guidance for the current quarter and full year, while its board authorized a 3-for-1 stock split.

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— Samantha Subin

Stock futures open slightly higher

Stock futures opened slightly higher in overnight trading Monday. Futures tied to the Dow Jones Industrial Average were last up 32 points, or 0.1%. S&P 500 and Nasdaq 100 futures added 0.11% and 0.16%, respectively.

— Samantha Subin

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