U.S. stocks slipped slightly on Tuesday, as investors digested mixed economic data and a slowing Chinese economy. Crypto investors weighed the potential impact of a new cryptocurrency exchange backed by Citadel Securities.
The Dow Jones Industrial Average fell 0.72%, to 34,053, the S&P 500 lost .47%, to 4,388, and the Nasdaq Composite dropped 0.16%, to 13,667. This was the first two-day losing streak in four weeks as U.S. equities trade off of one-year highs.
The selling could have been ferocious, but it was more subdued; investors are grappling with hawkish signals from the Fed, but clearly, the feeling in the market suggests investors don't want to miss out on what could be a stronger rally.
Retail Sales Data - A Positive Sign for the Economy
On Monday, we saw U.S. home construction surge by the most in three decades, and yesterday retail sales data was another unexpected positive sign for the economy. The value of retail purchases climbed 0.3% after an April jump of 0.4%. Even though these figures aren't inflation-adjusted, sales in 10 of 13 retail categories showed an advance.
It's certainly possible that consumer spending will slow down in the coming months. However, for now, the retail sales data suggests that the economy is still in good shape.
FedEx Corp. (FDX) posted mixed earnings and soft guidance - there's that cardboard box demand we discussed yesterday - pushing the stock down after hours. Even though FedEx topped analysts estimates, earnings have fallen an average 27% the last three quarters... which, unlike retail and housing, is a sign of a slowing economy.
Get Ready for the Launch of EDX
Investors were also weighing the potential impact of a new cryptocurrency exchange backed by Citadel Securities. The exchange, called EDX, is expected to launch in the coming months and will offer a variety of services, including spot and derivatives trading, margin lending, and staking.
The launch of EDX comes as the cryptocurrency market is facing new headwinds. Bitcoin (BTC) has fallen more than 50% from its all-time high in November 2021, and other cryptocurrencies have also declined sharply.
"The launch of EDX is a sign that the cryptocurrency market is maturing," said Michael Arone, chief investment strategist at State Street Global Advisors. "But it's also a reminder that the market is still volatile."
The Bottom Line: Today Is Make-or-Break for the Slowing Rally
Yesterday's price action showed investors taking a gut check on whether or not the rally can continue, so we'll be watching Jerome Powell deliver his semi-annual congressional testimony before the House Financial Services Committee today. As we've said all week, Powell has every reason to stay hawkish - inflation is still running north of 4%, too far from the 2% target for comfort - but the fact remains we're still likely closer to the end of this hiking cycle than the beginning.