Market Snapshot: U.S. stocks head for fourth day of losses as inflation anxieties bite

What’s driving markets

Stocks fell as a sales warning from semiconductor stalwart Nvidia Corp
NVDA,
-4.01%
rattled chip stocks even as President Joseph Biden signed the bipartisan Chips and Science Act into law. Meanwhile, anxieties ahead of inflation reports due out Wednesday and Thursday helped to put the market’s recent rally on pause.

See: Nvidia stock tumbles after company says revenue fell way shy of expectations

“There’s a lot of nervousness around the inflation reports coming out tomorrow and Thursday,” said Paul Nolte,  a portfolio manager at Kingsview Investment Management. “And continued weakness in the chips sector, which has historically been seen as a market-leading sector, is also helping to hold stocks back.”

Hopes that inflation may have peaked, allowing the Federal Reserve to pivot toward a less aggressive pace of monetary tightening, have helped the S&P 500 index bounce nearly 13% from its 2022 low reached in mid-June, but many analysts and several senior Fed officials have warned that hopes for a pivot might be premature.

See: U.S. consumers likely got some relief from sizzling price increases in July but Fed won’t feel any better

See also: Don’t be fooled by a drop in U.S. headline inflation. Markets will be attuned to another figure on Wednesday.

To be sure, economists expect a dip in energy prices will help headline year-over-year consumer price index for July fall from the multidecade high of 9.1% to 8.7%, according to economists polled by FactSet.

A drop Monday in the New York Fed’s measure of consumer inflation expectations was taken as a positive sign, but strong wage growth data in Friday’s July jobs report and a large rise in unit labor costs in data released Tuesday were a source of unease, analysts said.

“A hotter-than-anticipated CPI report will pressure markets this week. An in-line report could be taken in stride as investors have priced in a 75 basis point move by the Fed in September,” said Lindsey Bell, chief markets and money strategist for Ally.

“Either way, we still have to get through another jobs report, more inflation data, and Jackson Hole before we get to the Fed’s September meeting,” Bell said in emailed comments, referring to the annual central banker retreat in Wyoming later this month. “It could be a volatile several weeks ahead.”

Read: Nvidia is hit by another ‘crypto hangover,’ and that isn’t the only problem

See: A surging stock market is on the verge of signaling a ‘huge’ move — but there’s a catch

Meanwhile, the debate continues over whether the latest stock market advance is the start of a more prolonged uptrend or a rally that will fail when faced with slower economic growth and higher interest rates.

Read: Why the S&P 500’s ‘bounce within a bear market’ could fizzle before it hits 4,200

As the second-quarter earnings season comes to a close, Wells Fargo strategists warned that profit projections have been too rosy, potentially removing another support from the the market.

“We expect slowing revenue growth and higher costs to squeeze margins in the coming quarters, likely leading to an earnings recession over the next 12 months,” the Wells Fargo analysts said in a note to clients.

Need to Know: The red flag that preceded a halving of global equities in 2000 and 2007 is back, warns Citi

Meanwhile, the “meme-stock” phenomenon has returned this week, with Bed Bath & Beyond Inc.
BBBY,
-18.45%
shares soaring 36% Monday with no apparent news driving the move. AMC Entertainment Holdings Inc.
AMC,
-6.07%
and GameStop Corp.
GME,
-6.79%
also jumped Monday.

But shares of all three tumbled back to earth Tuesday, falling alongside the three main U.S. equity benchmarks.

Also see: Bed Bath & Beyond leads rally in ‘meme’ stocks as Reddit group appears to be jumping back on board

Companies in focus

• Shares of Micron Technology Inc.
  MU,
  -3.95%
  dropped nearly 5%, after the memory-chip company said that it expects “challenging” market conditions for the current quarter and the next one.

• Novavax Inc.
  NVAX,
  -30.90%
  shares slumped 30% after executives at the vaccine maker late Monday slashed their annual sales guidance in half while wildly missing financial expectations.

• Shares of Take-Two Interactive Software Inc.
  TTWO,
  -4.26%
  dropped 2.6% after the videogame publisher revised its outlook lower, to not only account for its recent acquisition of Zynga but for shifts in the release dates of some titles.

• Applebee’s and IHOP restaurant chains parent Dine Brands Global Inc.
  DIN,
  -0.82%
  reported second-quarter profit and revenue that beat Wall Street forecasts, citing “sustained off-premise traffic” and a continued recovery of dining in. Shares edged down by less than 1%.

• Hyatt Hotels Corp.
  H,
  +1.98%
  on Tuesday reported profit and revenue that topped expectations amid growth in hotel demand. Hyatt shares were up more than 2%.

• Shares of video gaming software company Unity Software Inc.
  U,
  -0.18%
  rose 0.1%, while Applovin Corp.’s stock
  APP,
  -11.29%
  tumbled 12%, after Applovin said it submitted an unsolicited bid to buy Unity in an all-stock deal with an enterprise value of $20 billion.

How are other assets faring

• U.S. traded crude oil
  CL.1,
  -0.29%
  was marginally lower Tuesday afternoon at $90.76 per barrel for the front-month contract.

• The 10-year Treasury yield
  TMUBMUSD10Y,
  2.801%
  rose 3 basis points to 2.792%. Yields and debt prices move opposite each other.

• The ICE U.S. Dollar index
  DXY,
  -0.05%,
  a measure of the currency against a basket of six major rivals, fell 0.1%, while gold
  GC00,
  +0.29%
  ticked up 0.4% to trade above $1,812 an ounce.

• Bitcoin
  BTCUSD,
  -4.19%
  fell 3.3% to trade near $23,039.

• Asia markets were mostly softer, with Hong Kong’s Hang Seng
  HSI,
  -0.21%
  down 0.2% and Japan’s Nikkei 225
  NIK,
  -0.88%
  off 0.9%. In Europe, the Stoxx 600
  SXXP,
  -0.67%
  fell 0.6%, while London’s FTSE 100
  UKX,
  +0.08%
  edged up 0.2%.