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Late-Day Weakness Leads To Lower Close On Wall Street

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Stocks showed a lack of direction for much of the session on Tuesday before coming under considerable pressure in late-day trading. With the downward move on the day, the major averages added to the notable losses posted on Monday.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow fell 192.51 points or 0.6 percent to 30,981.33, the Nasdaq slumped 107.87 points or 1 percent to 11,264.73 and the S&P 500 slid 35.63 points or 0.9 percent to 3,818.80.

The late-day weakness on Wall Street came as traders looked ahead to the Labor Department's report on consumer price inflation in the month of June.

Economists currently expect the report to show an acceleration in the annual rate of consumer price growth to 8.8 percent in June from 8.6 percent in May.

Concerns about the emergence of a new, more infectious Covid-19 strain in several parts of the world also continued to weigh on investors' minds.

Many cities in China are already taking steps to stop the spread of the new strain, leading to worries about another round of painful lockdowns, especially in Shanghai or Beijing.

A Covid-19 resurgence and the resumption of Chinese lockdowns could put further pressure on a global economy that is already being squeezed by aggressive monetary policy tightening by the world's central banks.

Investors also seemed to be moving money out of stocks ahead of what some expect to be a difficult quarterly earnings season.

However, snack and beverage giant PepsiCo (PEP) got the earnings season off to a positive start, reporting better than expected second quarter results and raised its full-year guidance.

Financial giants JPMorgan Chase (JPM), Morgan Stanley (MS), Citigroup (C) and Wells Fargo (WFC) are among the companies due to report their quarterly results in the coming days.

Sector News

Energy stocks saw substantial weakness on the day, moving sharply lower along with the price of crude oil. Crude for August delivery plummeted $8.25 or 7.9 percent to $95.84 a barrel, closing below $100 a barrel for the first time in two months.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 3.9 percent and the NYSE Arca Oil Index tumbled by 2.4 percent.

Significant weakness was also visible among gold stocks, as reflected by the 2.4 percent slump by the NYSE Arca Gold Bugs Index. The index dove to its worst closing level in over two years amid a decrease by the price of the precious metal.

Healthcare and retail stocks also saw notable weakness on the day, while the oil-sensitive airline sector bucked the downtrend, with the NYSE Arca Airline Index soaring by 4.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index tumbled by 1.8 percent, while China's Shanghai Composite Index slid by 1.0 percent.

Meanwhile, the major European markets turned positive over the course of the session. While the French CAC 40 Index advanced by 0.8 percent, the German DAX Index climbed by 0.6 percent and the U.K.'s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries gave back ground after an early surge but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.958 percent after hitting a low of 2.899 percent.

Looking Ahead

Trading on Wednesday is likely to be driven by reaction to the Labor Department's latest reading on consumer price inflation, which could impact the outlook for interest rates.

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