The S&P 500 opened lower on concerns that Federal Reserve rate hikes to combat persistently elevated inflation will hurt the economy. Treasuries extended their worst bond slide in decades as a dollar gauge rose to yet another record. The currency’s rally is “untenable” for risk assets including stocks, and in the past this kind of dollar strength has led to some kind of financial or economic crisis, according to Morgan Stanley strategists led by Michael Wilson.
U.S. markets will continue to remain challenged by uncertainty until companies start to report their third-quarter earnings next month, which will provide greater detail on the health of corporate revenues and profit, wrote John Stoltzfus, chief investment strategist at Oppenheimer. “What the market will need to see now to get out of the current conundrum is for inflation inputs to start coming down noticeably,” said Hogan. “We will get a read on the Fed’s preferred inflation indicator this Thursday when the second quarter core PCE is reported. Along with that investors will keep a close eye on the economic data stream for hints of prices paid coming down.”