U.S. Stocks Fall Ahead of Earnings With Strong Dollar Adding to a List of Worries

Barry Adams
11 Jul, 2022
New York City

Stocks declined on the first day of trading with a strong dollar adding to the worries of economic slowdown and rising inventories. 

With earnings in focus later in the week, investors are looking for signs of other troubles ahead in the market. 

This year's market decline of 19.6% has been driven by the rising interest rates and sky-high inflation but the second leg of the market downturn is likely to be driven by the falling rates of earnings growth. 

For now, earnings are expected to rise less than 5% in the June quarter and most sectors in the economy are likely to show even weaker or no growth, except the utilities, consumer staples, and energy. 

However, the strong dollar is also expected to weigh for the most corporations operating around the globe in addition to the surging inventories and ongoing supply chain disruptions. 

The euro is trading at parity to the U.S. dollar and at a two-decade low with the Ukraine war showing no signs of abating and an energy crisis looming in the region. 

The Japanese yen is also at a two-decade low driven by the surging imported prices of energy and rising costs of food. 

British political chaos and decades of economic mismanagement is finally knocking the British pound to the low last seen since 1984.    

One euro fetched $1.004, the British pound closed at $1.188 just shy of $1.15 seen in October 1984, and one dollar yielded 137.41 yen.  

The S&P 500 decreased 1.2% to 3,854.42 and the Nasdaq Composite index fell 2.20% to 11,372.60. 

Futures of crude oil dropped $1.12 to $103.66 a barrel and natural gas advanced 39 cents to $6.45 a unit. 

The yield on 10-year Treasury notes declined to 2.98% and stayed below the 3.05% yield for 2-year Treasury notes. 

For some investors, the inverted yields in the U.S. bond market flash signs of a coming recession. 

Banks are scheduled to kickstart the latest earnings season with JPMorgan Chase, Morgan Stanley, Citigroup, and Wells Fargo are among financial services companies releasing earnings on Friday. 

Delta Airlines and PepsiCo are scheduled to report earnings on Tuesday. 

Investors are also awaiting the June consumer inflation on Wednesday and the measure of inflation index is expected to cross 8.6% increase in May and wholesale prices on Thursday which is expected to cross 10%. 

Twitter Inc declined 11.2% after Elon Musk led investment group abandoned its $44 billion takeover bid. 

Twitter said the company will sue Elon Musk and demand the completion of the deal on the