U.S. Stocks Drop Ahead of Inflation Reports and Profit Squeeze Worries

Barry Adams
12 Jul, 2022
New York City

U.S. stocks turned lower in the final hour of trading ahead of inflation report on Wednesday. 

June consumer price index report is expected to surpass the 8.6% level reported in May tomorrow and wholesale price inflation report is expected to show an increase of 10% on Thursday.  

The surging dollar added to a list of worries as the euro traded at parity with the U.S. currency and the Japanese yen and the British pound traded near two-decade lows. 

Emerging market currencies also sank near record lows with surging inflation and rising fuel and food prices. 

Investors have been dialing down earnings growth expectations as corporations are squeezed from the rising interest rates, surging fuel prices and rising wage costs. The  dollar surge is 

The S&P 500 decreased 0.9% to 3,818.80 and the Nasdaq Composite index fell 0.95% to 11,264.73. 

Futures of crude oil dropped $8.51 to $95.60 a barrel and natural gas fell 20 cents to $6.22 a unit. 

The yield on 10-year Treasury notes declined to 2.95% and stayed below the 3.039% yield for 2-year Treasury notes. 

Airlines stocks soared after America Airlines said it expects second quarter revenues to top 2019 levels. 

American Airlines surged 9.9% to $14.48, United Airlines added 8.1% to $38.23, and Delta Airlines advanced 6.2% to $31.09. 

Delta is scheduled to release earnings on Wednesday. 

PepsiCo declined a fraction to $169.75 after the beverages and food products maker reported better than expected revenues and earnings. 

Peloton Interactive gained 3.9% to $9.27 after the high-end bicycle maker said it plans to end all its manufacturing activities and outsource its production. 

Canoo Inc soared 53.6% to $3.61 after Walmart agreed to buy 4,500 electric battery operated vans from the company with an option to purchase additional 5,500 vehicles. 

PriceSmart declined 9.6% to $65.54 after the wholesale club chain's quarterly earnings were affected by supply chain disruptions despite rising sales. 

 

Weak German Business Confidence Drags European Markets 

European markets reversed earlier losses and closed up amid the uncertainty linked to the future natural gas supply from Russia. 

Russia turned off natural gas flow through Nord Stream 1 pipeline for the previously announced scheduled maintenance for ten days. 

However, Germany and other European nations are bracing for an extended shutdown as the Ukraine war shows no signs of abating. 

Germany gets about one third of its natural gas from Russia. 

The DAX index rose 0.5% to 12,905.48, the CAC-40 gained 0.8% to 6,044.21, and the FTSE 100 index added 0.18% to 7,209.84. 

European markets opened lower as the energy crisis deepens in the region and worries of the faster U.S. interest rate hike after the release of inflation data on Wednesday. 

U.S. June consumer price inflation is expected to cross 8.6% reported in May stoking the fears of a 75 point rate hike at the next Fed's meeting on July 27. 

Business confidence index in Germany plunged more than expected in July, according to the data released by a private research institute. 

The ZEW Indicator of Economic Sentiment plunged to -53.8 in July from -28.0 in June, Leibniz Centre for European Economic Research reported on Tuesday. 

The indexes rebounded in the late afternoon trading shaking off the worries of the future energy supplies and looked ahead to earnings season kicking off later this week.  

AkzoNobel rebounded from the morning loss of 1% to close up 1.5% to 63.52 euros and the Dutch paint company plans to invest 20 million euros in France to improve production at two locations. 

Thales SA increased 2.4% to 123.30 euros after the electrical systems developer agreed to acquire Dutch OneWelcome for 100 million euros. 

United Utilities Group rose 0.3% to 1,036.50 pence and the British utility company agreed to sell its renewable energy to SDCL Energy Efficiency Income Trust plc for about