Market Snapshot: U.S. stocks close at lowest level in nearly 2 years as S&P 500 sees longest losing streak since February 2020

What’s driving markets

Investors may have breathed a sigh of relief as the Dow leapt 200 points higher at the open Tuesday, but the early bounce in stocks faded heading into midday as the dollar and the 10-year Treasury yield turned higher following a batch of stronger-than-expected U.S. economic data.

The yield on the 10-year Treasury
TMUBMUSD10Y,
3.970%
was up 9 basis points to 3.972%. However, investors got some relief on the short-end of the curve, as the 2-year yield
TMUBMUSD02Y,
4.311%
fell 1.7 basis points to 4.291%.

The data helped revive the “good news is bad news” dynamic that has occasionally added to stocks woes this year.

“What you saw today was ‘good news is bad news’ — we’re back to that again,” said Joe Saluzzi, co-head of equity trading at Themis Trading.

Saluzzi said that strong economic reports tend to weigh on the market because they’re seen as giving the Fed “more cover” to continue hiking interest rates, which will become increasingly important as more influential people complain about the Fed’s plans. On Friday, Wharton Professor Jeremy Siegel accused the Fed of making perhaps the biggest policy blunder in its more than century-long history.

See: Wharton’s Jeremy Siegel accuses Fed of making one of the biggest policy mistakes in its 110-year history

Investors digested a spate of U.S. economic data on Tuesday, but Saluzzi said the focus was on new home sales data for August, as well as a report on consumer confidence.

New home sales came in at 685,000 last month, handily beating consensus expectations, while the Conference Board’s consumer confidence indicator printed at 108, the best since April.

The boost to consumer attitudes has been driven mostly by lower gasoline prices and the still-robust labor market, said Peter Boockvar, chief investment officer at the Bleakley Advisory Group, in an emailed note responding to the data.

Investors also heard from several Fed speakers Tuesday, including Chicago Fed President Charles Evans, who said rates may need to plateau next year. Investors also heard from Fed Chairman Jerome Powell, but his comments focused on cryptocurrencies and stablecoins in particular.

See: Fed’s Powell Eyes Oversight of Stablecoin Issuers, Regulation of Crypto Wallets

Outside the U.S., relative calm returned to the U.K. gilt market
TMBMKGB-10Y,
4.514%
after its rout Friday and Monday, caused by fears about the government’s fiscal strategy. This in turn has helped steady the pound.

However, the dollar remained modestly higher, with the ICE U.S. Dollar Index
DXY,
+0.16%
up 0.1% at 114.19.

See: A surging U.S. dollar is creating an ‘untenable situation’ for the stock market, warns Morgan Stanley’s Wilson

In other economic-data news, durable-goods orders fell 0.2% in August, declining less than forecast. Orders minus transportation were up 0.2%, while core durable-goods orders climbed 1.3%.

The Case-Shiller 20-city home price index showed home prices fell in July for the first time in just over 10 years.

The CBOE Volatility gauge, also known as the VIX, rose 3.5% to 33.40 on Tuesday, marking the highest level of implied volatility since June.

See: The stock market could be on the verge of a ‘tradeable’ rebound, according to a key technical indicator

Wall Street’s benchmark S&P 500 index has fallen 5.7% over the last five trading days, as investor concerns about the economic impact of high inflation and rising interest rates resulted in signs of stress in the bond and currency markets. If the S&P 500 finishes lower on Tuesday, it would mark its sixth straight day in the red, the longest losing streak for stocks since Feb. 28, 2020.

Companies in focus

Nautilus Inc.
NLS,
+4.49%
said late Monday that a potential sale of the fitness-products company was being considered, part of a broader review of strategic alternatives launched by its board. Shares rose nearly 6%.

Hertz Global Holdings Inc.
HTZ,
+2.24%
and BP PLC
BP,
+0.27%
BP,
+0.94%
said Tuesday they have signed a memorandum of understanding for the development of a network of electric vehicle charging stations in North America. Shares of Hertz rose 3.1%, while BP’s U.S.-listed shares rose 0.3%.

State Street Corp.
STT,
-3.26%,
Domino’s Pizza Inc.
DPZ,
-3.23%
and Organon & Co.
OGN,
-3.14%
were among the biggest losers in the S&P 500.