Nasdaq, S&P 500, Dow Jones lose gains; yield curve flirts with inversion again

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The stock market lost early gains in a hurry Tuesday as short-term yields gained.

Even after Monday’s big selloff buyers look reluctant to commit ahead of tomorrow’s Fed announcement.

The Dow (DJI) -0.2%, off 55 to 30,461, S&P (SP500) -0.1%, down 5 to 3,745, and Nasdaq (COMP.IND) -0.2%, off 17 to 10,792, are slightly lower.

Seven of 11 S&P sectors are lower, with Utilities struggling the most. Energy leads the gainers. Megacaps are mixed.

“Often, after such a big drop we will see a bounce for a few days, but don’t take anything for granted in this market,” trader Nicholas Santiago tweeted.

“By some short-term metrics markets are certainly oversold,” BTIG market technician Jonathan Krinsky said. “On the other hand, oversold markets that can’t bounce are the ones that are the most treacherous.”

Investors watched the May Producer Price Index data come in line with forecast estimates. May PPI was +0.8% compared to the +0.8% consensus and +0.4% prior period.

The 10-Year Treasury yield is up 2 basis points to 3.39% while the 2-Year Treasury yield has gained 18 basis points to 3.38%.

Oil prices also moved up 2%, touching a three month trading high, even as OPEC delegates see an easing of global oil demand in 2023.

Goldman Sachs outlined its Fed expectations: “We have revised our forecast to include 75bp hikes in June and July … We then expect a 50bp hike in September and 25bp hikes in November and December, for an unchanged terminal rate of 3.25-3.5%.”

Prior to Friday’s CPI report a 50-basis point hike was cooked in. Now Wall Street is pricing in a 75-basis-point rate hike, which is something that has not been observed since the Alan Greenspan days more than 27 years ago.

Among active stocks Coinbase Global has reversed its premarket selloff as the firm is cutting its headcount by 18% to manage its expenses for an economic downturn.