The Nasdaq composite led the downside on Tuesday as stocks continued to pull back following last week’s move to the upside. The Dow Jones Industrial Average and S&P 500 also traded lower.
New-home sales released on Tuesday showed that US homebuilders are starting to experience an increase in supply as sales slow. According to the report, sales of newly built homes fell more than 8% in June from the previous month and were 17% lower on a year-over-year basis. Meanwhile, inventory rose to a supply of 9.3 months, up from a 5.6-month supply at the end of 2021.
“New-home sales rose in the Midwest but fell the largest in the West as the labor market continues to churn” noted Jeffrey Roach, chief economist for LPL Financial. “As workers change jobs and adjust to the hybrid working environment, housing will likely weaken further in areas with high cost of living.” Roach believes that there is more downside to go into housing and that rapidly rising borrowing costs are among the biggest factors behind the weakening sales.
Nasdaq Leads Downside As Indexes Pull Back
US Stock Market Today Overview
Last Update: 2:40 PM ET 7/26/2022
The Dow traded 0.6% lower about an hour before the market close. The S&P 500 declined 1.2% while the Nasdaq lost 1.9%. The Russell 2000 small-cap index also struggled but fared better than other major indexes, dropping 0.3%.
Volume was higher on the Nasdaq and the NYSE vs. the same time on Monday, which is a concerning sign. Stock market declines on heavy volume typically signal institutional selling. Meanwhile, US crude oil declined 1.2% to below $96 a barrel. The energy sector was among the worst performers on Tuesday. But consumer discretionary stocks led the downside by a wide margin. On the upside, health care stocks outperformed.
Walmart Shares Dive On Earnings
Shares of Dow Jones leader Walmart (WMT) fell 8%, leading the downside among blue chips after the company lowered its earnings forecast. Several other retail stocks declined in sympathy, including Target (TGT), Home Depot (HD) duck Best Buy (BBY), down 4%, 3% and 5%, respectively.
Walmart cut both its quarterly and full-year profit estimates due to rising food inflation. The retailer noted that higher prices are spurring consumers to pull back on general merchandise spending, namely in apparel. This has prompted selling in stocks like Kohl’s (KSS) duck Macy’s (M), down 7.8% and 6.5%, respectively. Meanwhile, the SPDR S&P Retail ETF (XRT) has lost 4.2%.
Nasdaq heavyweights Microsoft (MSFT) and Alphabet (GOOG) reported earnings after the closing bell.
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