Dow Jones Suffers Worst Day Since March

U.S. stocks sank Tuesday as bond yields ticked up and data showed consumer confidence fell for the second consecutive month in September.

The Nasdaq sank 1.6% Tuesday while the S&P 500 dropped 1.5%. The Dow Jones Industrial Average lost 1.1%, its biggest one-day decline since March.

Consumer confidence fell in September to its lowest level in four months, according to the Conference Board's monthly survey. The Consumer Confidence Index slipped to 103 from a revised level of 108.7 in August, a larger drop than economists were expecting.1

Investors are also contending with the possibility of a federal government shutdown. Lawmakers have until Sept. 30 to agree on a budget or pass a bill to extend the deadline and keep the government open. If they don't, up to 900,000 federal employees could be furloughed, including the economists and statisticians who collect and analyze the data the Federal Reserve needs to rein in inflation.

Bond yields dipped early in the morning before rising to match yesterday's highs. Asian and European equities sank, with the Japanese Nikkei dropping more than 1%. The dollar rose to its highest level all year.

Stocks eked out gains yesterday as Treasury yields continued their relentless climb, with the 10-year yield closing above 4.5% for the first time since 2007.

S&P 500 Gains and Losses

Here are the S&P 500 stocks that gained and lost the most today.

Dow Loses Nearly 400 Points on Interest Rate Jitters, Consumer Worries

A larger-than-expected drop in both consumer confidence and new home sales helped send the Dow Jones Industrial Average lower by 388 points, or 1.14%, in the index’s largest drop since March. 

JPMorgan Chase (JPM) CEO Jamie Dimon likely didn’t help matters when he said he’s warning clients that interest rates could go as high as 7%. The federal funds rate is currently within a range of 5.25% to 5.5%. Shares of JPMorgan fell about 1% after it agreed to pay the U.S. Virgin Islands $75 million to settle charges related to its business dealings with Jeffrey Epstein. 

Tech stocks led the Dow lower, with shares of Apple (AAPL) dropping 2.3% and IBM (IBM) falling 2.2%. Salesforce (CRM) lost 1.9% and Microsoft (MSFT) fell 1.7%. 

Shares of Intel (INTC) declined 1.3% after reports that it was having difficulty staffing its planned semiconductor facility in Germany. 

Honeywell (HON) shares fell 2.1% while construction equipment maker Caterpillar (CAT) declined 1.7%. 

Walmart (WMT) shares slipped 0.3%—making it the Dow’s third-best-performing stock—after it said it would partner with MobileX, a low-cost prepaid phone service launched by Boost Mobile cofounder Peter Adderton earlier this year. MobileX will be available for purchase from Walmart online and in stores.

Amgen (AMGN) and Travelers Companies (TRV) were the only components of the Dow 30 to close in the green, rising 0.8% and 0.1%, respectively.

Dollar Rises to Highest Level This Year

The dollar climbed Tuesday to its highest level since last November as the expectation of higher interest rates pushed up bond yields and sent investors to possibly the safest of all safe havens.

The U.S. Dollar Index gained 0.21% to about 106.2. And the dollar gained 0.2% on the euro, rising to its highest level since March. 

Does the Big Bad Wage-Price Spiral Even Exist?

Policymakers have for months highlighted the importance of labor market “rebalancing” in its efforts to control inflation. But the wage-price spiral officials are trying to avoid might not even exist, according to analysts at Morgan Stanley. 

The analysts, who analyzed IMF data from 38 countries over 60 years, found the correlation between wage growth and price increases in the U.S. has weakened over time. In the 1970s and 80s, a 100 basis point increase in wages increased core PCE by 75 basis points within a year. But that effect began deteriorating in the 1990s. By 2019, a 100bp wage increase added just 10bps to inflation in the first year, after which the effects were negligible.

When isolating goods and services inflation, wage increases were found to have next to no impact on goods inflation at all.

Midday Market Movers

Getty Images Holdings Inc. (GETY): Shares of the visual art marketplace rose more than 8% the day after it released its own AI image generator, made in partnership with Nvidia (NVDA).

Rivian Automotive Inc. (RIVN): Shares of the electric truck maker gained more than 5% after Baird named it a “fresh pick.” The firm expects Rivian to beat Wall Street’s estimates when it reports third-quarter deliveries in the coming weeks.

Cintas Corporation (CTAS): Shares of the business services provider lost more than 4% after its full-year revenue and earnings fell short of analysts’ estimates. 

Amazon.com Inc (AMZN): Shares fell more than 3% after the Federal Trade Commission sued the e-commerce giant, alleging it wields its monopoly power to stifle competition and boost sales.

Comerica Inc. (CMA): Shares of the regional lender after it was downgraded by Odeon Capital to hold from buy and lowered its price target to $46. 

Consumer Confidence Lowest Since May as Expectations Worsened

Consumer confidence fell to its lowest level since May, according to the Conference Board's monthly Consumer Confidence Index, as respondents reported concerns about the outlook for their personal finances.

The index fell to 103 from a revised level of 108.7 in August, a larger drop than economists had expected. The dip in sentiment could be primarily attributed to deteriorating expectations for business conditions, job availability, and income in the near future. A measure of consumers' expectations fell below 80, a level that historically signals a recession in the next year.

The disappointing print likely reflects a substantial amount of uncertainty. The proportion of consumers saying a recession was likely increased in September after falling last month. The proportion of respondents saying jobs were “plentiful” rose in September, but so did the share that said jobs were “hard to get.”

“Notably, average 12-month inflation expectations have held steady over the past three months despite ongoing complaints about higher prices,” according to the CCI release.1

FTC Sues Amazon Over Alleged Marketplace Monopoly

The U.S. Federal Trade Commission on Tuesday filed a long-anticipated lawsuit against Amazon.com Inc. (AMZN), alleging the e-commerce giant operates an online marketplace monopoly that stifles competition. 

The FTC and 17 states alleged in a complaint that Amazon uses its control of its marketplace to deter sellers and competitors from offering lower prices than Amazon. They also allege it conditions prime placement for sellers on their use of its fulfillment services. 

Ultimately, Amazon’s practices, regulators say, stifle competition and force consumers to pay higher prices for inferior goods.

Fisker Ramps Up Deliveries, Boosting Shares of the EV Maker

Shares of Fisker (FSR) jumped over 20% in early trading on Tuesday after the electric vehicle maker announced it was ramping up deliveries, and will likely exceed its guidance for 2023.

Fisker indicated it would be delivering 300 of its Ocean SUVs per day later this year. It has currently delivered 900 to its U.S. and European launch markets.2

It added that it has already produced 5,000 of the Oceans after reporting early this month that 3,123 had been made. In that statement, Fisker noted that it expected to increase production to 300 units per day in the fourth quarter, up from 180 units per day.3

Despite Tuesday’s gains, Fisker shares are down 7% for 2023. 

JPMorgan to Pay US Virgin Islands $75 Million to Settle Epstein Charges

JPMorgan Chase (JPM) agreed to pay the U.S. Virgin Islands a total of $75 million to settle charges related to its dealings with deceased sex offender Jeffrey Epstein.

The USVI had sought $190 million in damages according to a July court filing. The $75 million JPMorgan will pay includes $30 million for human trafficking charities, $25 million for law enforcement, and $20 million in legal fees.

Tuesday's settlement brings the bank's total costs from Epstein-related charges to more than $350 million. JPMorgan agreed in June to pay $290 million to Epstein's victim to settle allegations it helped facilitate his crimes. Including internal expenses and reputational damage, the cost of the bank's 15-year relationship with Epstein is likely much higher.

Ford Puts $3.5 Billion Michigan EV Battery Plant on Hold

Amid heightened political scrutiny and a strike by the United Auto Workers (UAW) union, Ford (F) said it will put on hold its $3.5 billion electric vehicle (EV) battery plant in Michigan.4

The move comes as the Big Three Detroit automakers—Ford, General Motors (GM), and Stellantis (STLA)—face an ongoing strike by the UAW in which the transition to EVs has become a sticking point in negotiations.

“Closing 65 plants over the last 20 years wasn’t enough for the Big Three, now they want to threaten us with closing plants that aren’t even open yet,” said union president Shawn Fain in a statement.5

Stocks Making the Biggest Moves Premarket

Gains: 

• Liberty Media Corp. (LSXMA): Shares of Liberty Media, the majority shareholder in Sirius XM Holdings (SIRI), proposed a plan to spin off its Sirius XM tracking stock group and merge it with SiriusXM to make a new publicly traded company, New SiriusXM. 
• Fisker Inc. (FSR): Shares of the electric vehicle maker rose more than 7% after it said it was ramping up production and delivery of its Ocean SUVs, aiming to deliver 300 vehicles a day by the end of this year. The company has produced 5,000 and delivered about 900 vehicles to date.
• DraftKings Inc. (DKNG): Shares of the online sports betting company rose more than 3% after analysts at JPMorgan upgraded the stock to overweight from neutral, citing the company’s wide moat and its stock’s underperformance over the last two months.

Losses:

• Thor Industries Inc. (THO): The RV maker’s shares slipped about 3% after unit sales and its full-year revenue and sales forecast fell short of Wall Street’s expectations.
• Tesla Inc. (TSLA): Shares of the EV maker fell about 1% after reports indicated it is under scrutiny by EU regulators investigating Chinese EV subsidies. Tesla this year has shipped nearly 100,000 cars to Europe from China. 
• Intel Corp. (INTC): Shares of the chipmaker fell nearly 1% after reports it is having difficulty finding workers capable of staffing the plant it's constructing in Germany, a project the government doled out significant incentives to secure. 

5 Things to Know Before Markets Open

Here's what investors need to know to start their day:

1. Ford (F) said it would pause work on a $3.5 billion electric battery plant in Michigan as it negotiates with the striking United Auto Workers. UAW President Shawn Fain criticized the move as a threat by Ford to cut jobs.
2. The Consumer Confidence Index is expected to drop to a reading of 105.5 for September, down from August’s 106.1, when that data is released at 10 a.m. ET.
3. Shares of recreational vehicle maker Thor Industries (THO) fell 2.4% after its full-year guidance for profit and sales fell short of analyst expectations on forecasts of lower consumer demand in the coming months.
4. Intel (INTC) shares moved 0.4% lower after reports that the company was having problems finding and training staff for a semiconductor plant in eastern Germany.
5. Pfizer (PFE) shares declined nearly 0.4% in pre-market trading after the drug maker said it had restarted production at a North Carolina facility damaged by a tornado in July, but that some medications won’t be in full supply until next year.

Stock Futures Lower Before the Open

Futures contracts connected to the Dow Jones Industrial Average were 0.3% in premarket trading Tuesday.

S&P 500 futures were down 0.3%.

Nasdaq 100 contracts also lost 0.3%.

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Originally published on Investopedia.com