Business Maverick: Stocks Waver as Treasuries Sound Recession Alarm: Markets Wrap

The Dow Jones Industrial Average of blue chips outperformed, while a rally in tech megacaps fizzled out, with losses in heavyweights like Microsoft Corp. and Tesla Inc. weighing on the broader market. The yield on the 10-year US note dropped as much as 12 basis points below the two-year rate, eclipsing the gap reached in early April. So-called inversions of the curve are regarded as a potential harbinger of an economic contraction.

Traders also kept a close eye on the US dollar, which remained at the highest levels since the Covid-19 panic of March 2020. For now, ais keeping the euro from hitting parity with the greenback for the first time in two decades. “In the current environment, dollar strength is a sign of investors’ worries about a global recession since it signals a flight to the relative safety of the world’s reserve currency,” wrote Nicholas Colas, co-founder of DataTrek Research. “Until the dollar starts to weaken, it is difficult to believe the lows are in for US equities in 2022.”

For Peter Boockvar at Bleakley Financial Group, investors will be very much focused on the currency moves and their impact on corporate profits. PepsiCo Inc., one of the first major industry players to report second-quarter earnings, said demand remained robust despite inflation — though it expected headwinds from a strong dollar.

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