A Light Thud.

U.S. stocks finished in negative territory on Tuesday after weak trade data from China and a potential credit rating downgrade on major U.S. banks.

?? DJIA -0.45%, S&P 500 -0.42%, NASDAQ -0.79%?

Global stocks were significantly weaker on Tuesday as news of China’s exports falling 14.5% for the year weighed. Meanwhile, China’s imports also dipped 12.4%, both figures were worse than forecasted. The data from China marked the biggest decline in the country’s exports since the COVID-19 outbreak in early 2020.

Revelations from the news affected several markets linked to China demand. Oil futures were under pressure for most of the session in New York but managed to recover, finishing higher in afternoon trade. Gold prices also fell as the U.S. dollar strengthened against other currencies.???

U.S. Treasury yields fell on Tuesday in reaction to the China data as global growth fears encouraged traders to buy government bonds. The U.S. Treasury also auctioned $42 billion of 3-year notes on Tuesday, the first installment of $103 billion in securities sales expected this week and as part of the government’s $1 trillion Q3 borrowing needs.

On the central banking front, Philly Fed President Patrick Hawker said on Tuesday that the Fed may be able to hold rates steady. Elsewhere, Richmond Fed President Tom Barkin said that the U.S. economy might avoid recession if inflationary pressures continue easing.

With the future trajectory of monetary policy, investors are waiting for Thursday’s latest reading on consumer inflation. The Consumer Price Index (CPI) is expected to come in at an annualized pace of +3.3% with core (excluding food & energy) at +4.7% for July, representing an uptick on the headline figure and a slight drop in core inflation from June. ?????

In other news, bank shares were weighed down by a possible downgrade by Moody’s Investor Service on six major U.S. banks as fears mount over the strength of the financial sector.

Lastly, the U.S. trade deficit fell 4% to $65.5 billion in June as imports declined, potentially signaling a change in consumer habits and slowing global manufacturing. ??

Looking Ahead

It was a tough day on Wall Street, all major stock indexes finished in negative territory, but they were well off their intraday lows. Needless to say, the intraday recovery was a positive, indicative of some dip buying perhaps, but risks for markets still remain.

A Few Considerations:

• The “Fed is Done” narrative is still in question as inflation reaccelerating could force the Federal Reserve to continue its hiking cycle a little while longer.
• Oil futures started advancing despite weak data from China, they could continue to move higher.
• While U.S. yields retreated on Tuesday, the 10-year yield is still above 4.00%, can it advance further?
• Does the narrowing of the U.S. Trade Deficit imply consumers are indeed changing their habits??
• By our assessment, equities seem priced to perfection, can they really grow from here?

We have maintained and reinforced our strategically defensive posture, as we believe a correction in this rally is well underway. Remaining vigilant against risk is a serious consideration as there are legitimate concerns for financial markets going forward.

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?? Today’s Market Dashboard

Today’s Market Dashboard will be discontinued starting next week.

Today’s Market Dashboard is a collection of important data covering markets, the economy, and news items we’ve monitored throughout the trading day.

Economic Data

• NFIB Small Business Optimism (Jul): 91.9 (Forecast: 90.6, Prior: 91.0)
• U.S. Trade Deficit (Jun): -65.50B (Forecast: -65.00B, Prior: -68.30B)
• Redbook (YoY): 0.3% (Prior: 0.1%)???
• IBD/TIPP Economic Optimism: 40.3 (Forecast: 43.0, Prior: 41.3)??
• Wholesale Inventories (MoM) (Jun): -0.5% (Forecast: -0.3%, Prior: -0.4%)
• Wholesale Trade Sales (MoM) (Jun): -0.7% (Forecast: 0.3%, Prior: -0.5%)?
• 52-Week Bill Auction: 5.060% (Prior: 5.130%)

Wires?

• [12:20 ET] Fed's Harker: Sometime probably next year we'll start cutting rates.
• [11:00 ET] NY Fed: Credit card balances rose 4.6% to a record $1.03 tln in the Q2.
• [08:40 ET] Saudi Cabinet: Kingdom to continue boosting OPEC+ precautionary efforts to support stability of the oil markets - SPA.
• [08:15 ET] Fed's Harker: I see Core PCE declining to just below 4% by end of 2023, below 3% in 2024 and at 2% target in 2025.
• [08:15 ET] Fed's Harker: Barring alarming new data by mid-September, i believe we may be at the point where we can be patient and hold rates steady.

Geopolitical Headlines

• China reports double-digit plunge in July exports and imports, missing expectations (CNBC)
• Taiwanese chips giant moves ahead with German plant investment (POLITICO)
• Russia Joins Iran In Criticizing Western Pressure Over Nuclear Deal (RFE/RL)
• Blinken Wary Of Russia's Wagner Taking Advantage Of Instability In Niger (RFE/RL)
• Pakistan’s Former PM Imran Khan Appeals Conviction in Graft Case, Seeks Release (The Diplomat)

OUR FIRM

MCF Capital Management, LLC is an independent, family-run, financial advisory firm that manages investment portfolios for individuals and businesses through Quantitative Market Data Analysis.

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THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?

???SOURCES:?MarketWatch, Investing.com, CNBC, FinancialJuice, Dow Jones NewsPlus