Stocks fall, bonds rise as investors seek safety

  • Wall St shares fall after Walmart shock
  • Dollar rises as Treasuries catch bid
  • European stocks were little changed as concerns over the gas crisis mount
  • Oil prices fall, gold crashes

NEW YORK, July 26 (Reuters) – Wall Street stocks fell and U.S. Treasuries rallied on Tuesday as investors struggled, a day before a likely Federal Reserve rate hike, amid economic worries rising after retail giant Walmart’s profit warning and signs of a looming gas supply crisis in Europe.

The safety bid also boosted the US dollar after three sessions of declines and weighed on the euro. Read more

European Union leaders agreed to ration the use of gas after Russia’s Gazprom (GAZP.MM) said gas flows to Germany would fall from Wednesday to half the current amount – already at only 40% of normal capacity. Read more

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U.S. stocks fell along with retail stocks after Walmart Inc (WMT.N) slashed its earnings forecast on Monday night as soaring food and fuel prices prompted consumers to cut back on discretionary purchases. Read more

Given that Walmart is seen as a “litmus test for consumer health,” Carol M. Schleif, deputy chief investment officer at BMO Family Office, said investors are worried about growth and feeling uncertain ahead of the data. key economic data to be released this week and the Fed’s interest rate decision expected on Wednesday.

“This week is forcing investors to focus on the very short term. It doesn’t allow anyone to look up even a week or a month,” Schleif said. “It’s an asset market, not just stocks, which seems to suggest that people think growth is questionable in the medium term.”

Investors expect the Fed to hike 75 basis points on Wednesday – with markets pricing around 10% risk of a bigger hike, and are waiting to see if the economic warning signs prompt further a change in rhetoric.

“If they did 100 basis points, that would probably surprise the market. There’s this nervousness. If it’s 75 as expected and the Fed says it’s starting to see signs of slowing down, the market might consider that as positive,” Schleif said.

The Dow Jones Industrial Average (.DJI) fell 240.84 points, or 0.75%, to 31,749.2, the S&P 500 (.SPX) lost 51.75 points, or 1.30%, to 3,915.09 and the Nasdaq Composite (.IXIC) fell 237.52 points, or 2.02%, to 11,545.14.

The pan-European STOXX 600 index (.STOXX) lost 0.03% and the MSCI gauge of stocks across the world (.MIWD00000PUS) lost 1.02%.

Adding to Tuesday’s gloom, the International Monetary Fund’s forecast for global real GDP growth of 3.2% in 2022, down from its forecast of 3.6% released in April, with related downside risks. to high inflation and the war in Ukraine potentially pushing the global economy to the brink of recession. Read more

The spread between two- and 10-year Treasury yields widened on Tuesday after more than two weeks of short-term yield outperforming long-term yield — often a signal of recession.

Benchmark 10-year notes were last up 9/32 to 2.7867%, down from 2.82% on Monday night. The 2-year note last fell 1/32 in price to fetch 3.0426% from 3.035%.

Steven Ricchiuto, chief US economist at Mizuho Securities USA LLC, noted news from Europe was pushing the euro lower and leading the dollar as investors felt safe.

“U.S. macro conditions, global macro conditions, could lead to an environment where outsiders may seek to seize to yield in Treasury space,” Ricchiuto said. “If you are a global investor, where are you going to put your money? »

The dollar index rose 0.705%, with the euro falling 0.98% to $1.012.

The Japanese yen strengthened 0.01% against the greenback to 136.68 to the dollar, while the pound last traded at $1.2025, down 0.14% on the day.

After rising earlier in the session, oil prices were in the red on weaker consumer confidence and the expectation of an additional 20 million barrels of crude oil being released from the US Strategic Petroleum Reserve. .

Prices were supported earlier in the session on news that Russia was tightening its gas squeeze on Europe. Read more

U.S. crude fell 1.86% to $94.90 a barrel and Brent to $104.22, down 0.88% on the day.

Spot gold fell 0.1% to $1,717.37 an ounce as investors watched economic uncertainties and waited for the Fed.

Bitcoin last fell 2.18% to $20,842.56.

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Additional reporting Herbert Lash in New York, Kane Wu in Hong Kong; Editing by Edmund Klamann, Angus MacSwan and Mark Heinrich

Our standards: The Thomson Reuters Trust Principles.

Mary I. Bruner