The U.S. stock market is declining ahead of a week of quarterly financial reports from retailers and government statistics that might shed insight on how American consumers and companies are coping with persistent, four-decade-high inflation.
At 10:28 a.m. Eastern, the S&P 500 slid 13 points, or 0.30 percent, to 4,267, while the Dow Jones industrials fell 35 points, or 0.5 percent, to 33,725. The Nasdaq fell 0.32 percent.
Oil prices dropped more than five percent and are approaching levels not seen since Russia’s invasion of Ukraine in late February.
Tuesday brings earnings results from Walmart and Home Depot, followed by Lowe’s and Target on Wednesday. Three months ago, when first-quarter financial results from major retailers indicated a seismic change in consumer spending, as well as a considerable struggle to cope with soaring inflation on food and gasoline and greater costs from a tangled global supply chain, the U.S. markets were battered.
The United States publishes retail sales figures for July on Wednesday. Economists polled by FactSet anticipate a slight 0.2% increase from June’s sales growth of 1.0%. This rise was mostly attributable to increasing costs, especially for gasoline. However, it also demonstrated that Americans continue to spend, giving vital support for the economy, although some analysts contend that this is mostly coming from people with higher incomes.
Businesses have increased prices across the board, from food to apparel, to cover rising expenses. Russia’s invasion of Ukraine exacerbated inflationary pressures by driving up energy and crucial food commodity prices.
China reduces major interest rate
China’s central bank slashed a key interest rate on Monday to bolster sluggish economic development at a politically delicate moment when President Xi Jinping is attempting to consolidate his control. Last quarter, China’s central bank stated its economy gained momentum.
The People’s Bank of China reduced the interest rate on a one-year loan to 2.75 percent from 2.85 percent and pumped an additional 400 billion yuan ($60 billion) into the lending markets after official statistics revealed a decline in manufacturing production and retail sales in July.
After two years of strict measures to combat COVID-19, tourism has resumed, but only to roughly a fourth of its pre-pandemic level.
Capital Economics’ Gareth Leather stated in a statement that the forecast for the remainder of the year would rely largely on how soon tourism returns.
In other trade on Monday, the price of U.S. benchmark crude oil fell $4.46 per barrel to $87.63 per barrel on the New York Mercantile Exchange. Friday it fell $2.25 per barrel.
Brent crude oil, the benchmark for international prices, fell $4.62 a barrel to $93.53 per barrel.
Wall Street closed a turbulent trading week with a wide rebound on Friday, as the S&P 500 recorded its fourth straight weekly gain.
“More volatility to come”
The major indices gained substantially on Wednesday after a report revealed that inflation slowed faster than anticipated in the previous month. Another data released on Thursday indicated that wholesale inflation decreased faster than anticipated.
Investors became optimistic that inflation may be nearing its peak and that the Federal Reserve may lighten off on interest rate rises, its primary weapon against inflation.
Inflation, like the weather, is very unpredictable, Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, said in a recent note, urging investors not to place too much stock in an easing of Fed rate rises.
“There is a good chance that the Fed will have to raise interest rates more than the market and we now anticipate,” Marcelli said, adding that investors should “be ready for additional volatility as the weather cools.”
Investors are concerned that the Fed may push the economy into a recession due to its aggressive rate rise schedule.