Market Snapshot: S&P 500 struggles to hold gains as Powell says no guarantee of soft landing for U.S. economy

United States

U.S. stock indexes traded mixed Wednesday, as investors tuned in to remarks by central bankers while fretting that soaring inflation is damaging the world’s biggest economy.

How are stock indexes trading?
  • The Dow Jones Industrial Average DJIA, +0.07%  was up 78 points, or 0.3%, to 31,029.
  • The S&P 500 SPX, -0.32%  edged down 3 points, or 0.08%, to 3,818.
  • The Nasdaq Composite COMP, -0.39% lost 13.7 points, or 0.1%, to 11,168.

On Tuesday, the Dow fell 491.27 points, or 1.6%. The S&P 500 fell 2% and the Nasdaq Composite dropped 3%. All three booked their worst daily percentage declines since June 16, according to Dow Jones Market Data.

What’s driving markets?

The Dow remains higher from yesterday, but the number of declining stocks is outnumbering advancers 1,958 to 876 on the New York Stock Exchange and 2,426 to 1,120 on the Nasdaq.

Federal Reserve Chair Jerome Powell said Wednesday at a European Central Bank forum on central banking that he sees a path back to 2% inflation while sustaining strong labor market, but warned there was “no guarantee that we can do that.”

Investors were also listening to remarks from European Central Bank President Christine Lagarde, Bank of England Gov. Andrew Bailey and Augustin Carstens, head of Bank for International Settlements, at the same conference.

On U.S. economic data, the first-quarter GDP was revised to show an 1.6% decline, compared with the prior 1.5% drop.

“I think the biggest conundrum we have right now is we have not had an earnings recession, the analysts remain positive in this quarter,” Louis Navellier, chairman of Navellier & Associates, said in an interview. However, corporate profit margins are under pressure as inflation remains heated, Navellier noted.

“This is going to be a very interesting quarter where I’ve never seen a recession where their earnings are still accelerating,” according to Navellier. 

Equities were limping toward the end of a miserable first half of the year. The S&P 500 is down 19.6% so far in 2022 — on track for the worst first-half performance since 1970 — hit by concerns that inflation rates at multidecade highs are badly damaging household sentiment and that the Federal Reserve’s response to surging prices may tip the economy into recession.

Read: What’s next for the stock market after the worst 1st half since 1970? Here’s the history.

On Tuesday, the Conference Board’s consumer-confidence index dropped in June to a 16-month low of 98.7, with consumers’ outlook on the state of the economy at the most cautious in nearly 10 years. The news helped turn early gains for Wall Steet into heavy losses, with the Nasdaq Composite shedding 3%, leaving the tech-heavy index nursing a loss of 28% for the year to date.

“Last week, U.S. equity markets rallied on the back of the arcane logic that a U.S. recession would mean a lower terminal Fed funds rates and thus, was bullish for stocks… That premise was boosted by weak Michigan Consumer Sentiment data,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

See: Wall Street’s favorite stock sector has potential upside of 43% as we enter the second half of 2022

On Tuesday, “even weaker U.S. Conference Board Consumer Confidence data provoked the opposite reaction, with U.S. stocks plummeting,” he added.

Wall Steet’s dive left Asian and European bourses floundering. Hong Kong’s Hang Seng HSI, -1.88% fell 2% and the Nikkei 225 NIK, -0.91% in Japan slipped 0.9%. China’s Shanghai Composite SHCOMP, -1.40% shed 1.4% after President Xi Jinping reiterated that the regime’s strict COVID-19 policy was “correct and effective.”

The comments added to worries that supply constraints in China could exacerbate global inflationary pressures. And such concerns were illustrated in Spain on Wednesday, where data showed prices rising by 10.2% in June, their fastest pace in 37 years. Europe’s Stoxx 600 SXXP, -0.67% fell 0.8%.

Companies in focus
  • Shares of Pinterest Inc. PINS, -0.36% lost 1.1% after the social-media company said Tuesday co-founder Ben Silbermann is stepping down as chief executive and is being replaced by an e-commerce executive from Google.
  • Bed Bath & Beyond Inc. BBBY, -20.26% shares fell 21% after it announced disappointing fiscal first-quarter results and the ouster of its chief executive, Mark Tritton.
  • General Mills Inc. GIS, +5.91% shares rose 6.2% after beating quarterly expectations.
Other assets
  • The yield on the U.S. 10-year Treasury note BX:TMUBMUSD10Y eased 7 basis points to 3.107%.
  • The ICE U.S. Dollar Index DXY, +0.31%  edged up 0.4%.
  • Bitcoin BTCUSD, -0.93%  fell 2.9% to trade near $ 20,020.
  • Oil prices edged lower, with WTI crude CL.1, down 0.1% to $ 111.60 a barrel.
  • August gold futures GCQ22, -0.05% lost $ 4.30, or 0.2%, to $ 1817.50 an ounce.