U.S. stocks traded mixed Tuesday, while Treasury bond yields moved lower and the dollar consolidated gains against its global peers, as investors kept clear of risk markets into the start of the second quarter earnings season and key inflation data later in the week.
Earnings could provide the key to market performance heading into the second half of the year, as investors largely price-in both near-term rate hikes from the Federal Reserve while debating the prospects of a possible recession in the world's largest economy.
Around 18 companies, including major lenders JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC), are set to kick-off the earnings calendar this week, with analysts expecting collective S&P 500 profits to rise 5.7% from last year to a share-weighted $465.3 billion.
Energy, industrial and bank profits, however, will likely comprise around a third of that total, suggesting even a stronger-than-expected overall reporting season may not be enough to dispel recession concerns.
On that front, Treasury bond yields continue to flash recession warnings, with 2-year Treasury note yields trading at 3.033% and 10-yearsnotes trading at 2.93%. extending the so-called 'inversion' of the yield curve into a fourth consecutive session.
The dollar index, which tracks the greenback against a basket of its global peers, was marked 0.05% lower at 107.899 after hitting a fresh twenty-year high of 108.466 earlier in the session.
The European single currency, meanwhile, traded at parity against the U.S. dollar for the first time in more than two decades.
The European Central Bank has remained patient on the idea of rate hikes to defend the currency, and fight the fastest inflation on record, amid concerns over the broader impact on the region's growth prospects, particularly for indebted member states such as Spain, Italy, Greece and Portugal.
Russia's threat to cut off natural gas supplies, which have spiked near-term prices and could trigger a full-blown autumn energy crisis, alongside the lingering impact of the war in Ukraine, have added to the euro's weakness, as has the more wide-spread "risk off" environment that has lifted the dollar -- a traditional safe-haven currency -- to multi-decade highs.
The dollar's surge, alongside recession concerns and a pullback in global demand forecasts from OPEC, sent crude prices sharply lower in overnight trading, with WTI futures contracts for August delivery falling $7.68 to $96.42 per barrel.
In overseas markets, Europe's Stoxx 600 gained 0.49% by the close of trading in Frankfurt while stocks in Asia ended firmly lower amid concerns over the rise of new Covid variant infections in China, which pulled the MSCI ex-Japan index into a 1.24% decline for the session.
On Wall Street, the S&P 500, which is down 19.1% for the year, was marked 9 points higher in early afternoon trading while the Dow Jones Industrial Average gained 150 points. The tech-focused Nasdaq gained 26 points thanks in part to lower Treasury bond yields and early gains from Apple (AAPL) and Tesla.
Twitter (TWTR) shares reversed their earlier declines, lifting the stock from a fresh four-month low, as the social media group indicated its ready for a protracted legal battle in its takeover dispute with Tesla (TSLA) CEO Elon Musk.
Peloton Interactive (PTON) shares jumped 4.5% after the connected fitness equipment maker said it would stop making its flagship exercise bike in-house and instead expand a manufacturing contract with a group in Taiwan.
Gap Inc. (GPS) shares slumped 5.5% after Sonia Syngal said she will step down as group CEO after only two years and the struggling apparel retailer added current quarter sales would continue to decline.
PepsiCo (PEP) shares bumped 0.3% higher after it posted better-than-expected second quarter earnings and boosted its full-year sales forecast, as demand in north America continued to drive the group's top and bottom line growth.
