Tech Pressures on Wall Awaiting Inflation Data

LAST UPDATE: 19:50

Wall Street was cautious on Tuesday, with the Nasdaq leading the decline and the S&P 500 heading for its fourth straight day of losses, as investors await tomorrow’s data on the path of July inflation, which could judge the fate of the recent summer rally.

In particular, the Dow Jones Industrial Average lost 48.05 points or 0.15% to 32,784.49 points, the broader S&P 500 slipped 0.56% to 4,116.82 points, while the tech Nasdaq was under the strongest pressure and down 1.51% to 12,451.73 points.

The US stock market appears to have slowed, but remains close to recent highs, ahead of the release of the July Consumer Price Index report tomorrow.

Hopes that inflation may have peaked and that the Federal Reserve could therefore adopt a less aggressive monetary tightening policy helped stocks recover and the broader S&P 500 climbed nearly 13% higher than its 2022 lows in mid June.

This recovery was also helped in the last weeks by the corporate results of the second quarter, which after all were not as bad as expected.

However, the sales warning issued by the former on Monday gave the “bulls” an opportunity to think. After all, several analysts warn that the market’s optimism of late will be further questioned if the consumer prices to be announced tomorrow are higher than expected.

“This temporary lull could clearly reverse tomorrow after the latest US CPI data, so perhaps the next 30 hours will mark the calm before the storm, or perhaps herald the actual start of the tough days of summer,” note the Deutsche Bank analysts.

Economists forecast that the drop in energy prices would help July’s CPI fall, on an annual basis, from a multi-decade high of 9.1 percent to 8.7 percent.

However, data from the productivity front does not leave much room for optimism. In particular, the data released showed that productivity in the US fell in the second quarter of the year at a rate of 4.6% on an annual basis, while in the same period the cost of labor per unit of product jumped by 10.8%, intensifying fears about the inflationary pressures.

Meanwhile, debate continues over whether the stock market’s latest rally is the start of a more prolonged uptrend or a rally that will come to an inglorious end due to slower economic growth and higher interest rates.

Wells Fargo’s strategists have also warned that forecasts for corporate profitability were too rosy. “We expect slowing revenue and higher costs to squeeze margins in the coming quarters, likely leading to a contraction in earnings over the next 12 months,” they said in a note to clients.

On the business front, Micron Technology stock fell nearly 4.5% after the semiconductor company warned of “challenging” conditions in the current and next quarters.

“Plunge” of the order of 28% is registered by the title of Novavax, following the disappointing guidance announced by the vaccine company late on Monday night for its figures for the whole year.