Here are the most important news, trends and analysis that investors need to start their trading day:
- Wall Street set to rise after S&P 500 officially closed in bear market
- 10-year Treasury yield backs off 2011 highs after cooler inflation data
- Fed to begin two-day meeting and markets now expect a 0.75% rate hike
- Coinbase to lay off 18% of full-time jobs; bitcoin plunges again
- Oracle surges as database software giant beats on earnings, revenue
1. Wall Street set to rise after S&P 500 officially closed in bear market
U.S. stock futures bounced after Tuesday’s cooler inflation report and what could be an even more aggressive Federal Reserve interest rate hike Wednesday. The S&P 500 on Monday officially closed in bear market territory, defined as a decline of 20% or more from its prior high, which was in January. The broad market index also hit a new low for the year.
- Monday’s steep sell-off saw the S&P 500 lose 3.9% and the Nasdaq — already in a bear market since March — drop 4.7%. The Dow sank 876 points or 2.8%. The 30-stock average fell further into a correction, down 17% since its January record high. A correction is defined as a decline of 10% or more from a prior high. All three stock benchmarks have dropped for four sessions in a row.
2. 10-year Treasury yield backs off 2011 highs after cooler inflation data
The 10-year Treasury yield on Tuesday backed off 2011 highs, trading around 3.3%, after the government’s May producer price index rose 10.8% year over year, a slightly smaller rise than expected. The PPI is the other side of the inflation coin at the wholesale level, after last week’s hotter-than-expected consumer price index. The PPI remained near its historic year-over-year high of up 11.5% in March.
3. Fed to begin two-day meeting and markets now expect a 0.75% rate hike
The markets expect the Fed to hike rates by 0.75% at the end of its two-day June policy meeting Wednesday. Only the magnitude of the rate increase is in question, as Fed Chairman Jerome Powell has repeatedly said that 0.5% rises in June and July looked appropriate.
- After the Fed’s May meeting, which saw rates go up 0.5%, Powell took a 0.75% hike off the table.
- But a lot has changed since then with the stock market sell-off and the surge in bond yields, and another recession-signaling 2-year yield and 10-year yield inversion.
- The markets are concerned the Fed is going to have to clamp down much harder on the economy to fight inflation and that it might lead to a recession.
4. Coinbase to lay off 18% of full-time jobs; bitcoin plunges again
Crypto exchange Coinbase will cut 18% of full-time jobs, according to an email sent to employees Tuesday. CEO Brian Armstrong pointed to a possible recession, a need to manage costs, and growing “too quickly” during a bull market. Shares of Coinbase fell 7% in the premarket after closing down 11.4% on Monday. Before Tuesday’s premarket drop, the stock dropped 79% year to date as bitcoin and the entire crypto market has sold off in 2022.
- Bitcoin briefly dropped below $21,000 overnight in Asia before bouncing back slightly. Crypto assets were hammered Monday as concerns mount over lending platform Celsius and crypto exchange Binance briefly pausing withdrawals. Bitcoin, trading around $22,000 early Tuesday, has fallen roughly 68% from its all-time in November.
5. Oracle surges as database software giant beats on earnings, revenue
Oracle shares surged 11% in Tuesday’s premarket, the morning after the database software company issued fiscal fourth-quarter earnings and revenue that exceeded estimates. Revenue increased 5% to $11.84 billion from a year earlier, driven by growth in the company’s cloud infrastructure business, which competes with Amazon Web Services and Microsoft Azure.
- Oracle CEO Safra Catz said in a statement, “We believe that this revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase.” Oracle’s earnings beat is particularly important as investors turn their focus to companies that can generate profitability and cash during a downturn. Before the after-hours jump, Oracle shares were down 27% for the year.