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- S&P 500 (SPY): -0.51%
- Nasdaq (QQQ): -0.22%
- Dow Jones (DIA): -0.73%
- Russell 2000 (IWM): -0.09%
- Volatility Index (VIX): -1.72%
- Amazon (AMZN): +1.07%
- Tesla (TSLA): +1.63%
- Twitter (TWTR): +7.85%
- Zoom (ZM): -6.57%
- Unity Software (U): -17.25%
- IronSource (IS): +49.33%
- Gamestop (GME): +3.11%
- AMC Entertainment (AMC): -2.89%
Stocks finished modestly lower in a choppy session as investors digested the latest consumer price index (CPI) numbers, which showed inflation has continued to accelerate from already elevated levels to over 9% year-over-year. Treasury yields were also in focus, with sharp moves happening at the front end of the yield curve. The 10-year rose as high as 3.04% following the CPI print before retreating, with 2-year yields rising as much as 3.17%, prompting a further inversion. The yield curve “inverts” when yields on shorter-dated Treasuries rise above those of longer-dated ones and have typically preceded recessions on Wall Street.
Meanwhile in currency markets, the euro fell below parity — or a 1:1 value — with the dollar early Wednesday, the first time in over twenty years.
In the US, the Bureau of Labor Statistics revealed headline inflation rose a whooping 9.1% year-over-year, another drastic acceleration from the already-elevated 8.6% reported last month and higher than estimates of 8.8%. “Core” CPI, which excludes the more volatile food and energy components, rose 5.9% in June, compared to 6.0% in May. Economists expected a 5.7% increase in this measure.
These figures confirm another 75 basis point hike to the interest rate at the conclusion of the July 27 policy meeting, with some even speculating the Fed may be forced to consider a dramatic 100 basis point hike.
Michael Pearce, senior US economist at Capital Economics, said “Overall, this report confirms that the Fed will need to hike by 75bp again at the end-July meeting. While some will draw parallels with the shockingly bad May CPI report, the backdrop is markedly different — commodity prices have fallen sharply and we’ve seen clearer signs of an economic slowdown, both of which will contribute to weaker price pressures ahead.”
In addition to the CPI print, market participants digested the start of a new earnings season.
Delta Air Lines (DAL) reported earnings that missed expectations on Wednesday morning as higher costs bit the airline currently battling with excess demand and constrained capacity. Shares of Delta fell 4.7%. JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) are among the big banks to follow suit Thursday and Friday.
- Notorious short-seller Hindenburg Research said it had taken up a long position on Twitter shares. “We have accumulated a significant long position in shares of Twitter. Twitter’s complaint poses a credible threat to Musk’s empire,” Hindenburg said in a tweet.
- Hedge fund manager Bill Ackman told investors Monday he would return $4 billion raised by the SPAC he launched in 2020.
- Peloton will stop making its own equipment as the company pivots focus from selling hardware to selling subscriptions. Taiwanese company Rexon Industrial will become the primary manufacturer of the bikes.
- Kathaleen McCormick will oversee Twitter’s (TWTR) lawsuit against Tesla CEO Elon Musk after he pulled out of the deal to acquire the social media company for $44 billion.
- Netflix (NFLX) announced Microsoft (MSFT) as its partner ofr its ads-supported service, which the company will employ following last quarter’s disastrous results.
- Amazon’s (AMZN) Prime Day sales generated $6 billion in sales, up 7.8% from last year, making it the biggest U.S. online shopping day of 2022 so far.
- Alphabet Inc.’s Google plans to slow hiring for the remainder of the year in the face of a potential economic recession, Chief Executive Officer Sundar Pichai said Tuesday in an email to staff.
“If you really look closely, most overnight successes took a long time.” –Steve Jobs