US stocks drop after holiday break as global recession fears flare up

·2 min read
Traders work on the floor of the New York Stock Exchange (NYSE)
A trader works on the floor of the New York Stock Exchange.Spencer Platt/Getty Images
  • US stocks fell Tuesday as investors returned from the Independence Day break.

  • The US dollar soared to a fresh 20-year high against the euro.

  • The UK's central bank warned of deteriorating global economic conditions.

US stocks fell Tuesday with recession concerns in mind among investors during a holiday-shortened week that should shed more light on the Federal Reserve's thinking about economic conditions.

Wall Street's major indexes had indicated a higher open, bolstered by optimism over a potential easing of Chinese tariffs by the US government as US Treasury Secretary Janet Yellen held a virtual meeting with Chinese Vice Premier Liu He on Tuesday. The Wall Street Journal had reported President Joe Biden was considering an end to some China tariffs in an effort to improve global supply chains.

But the gains eventually evaporated as the US Dollar Index spiked up to a fresh 20-year high, with the euro sinking against the dollar. "Global recession fears are back front and center… We've seen a massive push in the US Dollar's favor as a consequence on the combination of traditional flight to safety demand for the buck and yield differentials which have the Fed responding more aggressively to higher inflation than other major central banks," forex broker LMAX said in a blog post Tuesday.

Here's where US indexes stood at 9:30 a.m. on Tuesday: 

The "global economic outlook has deteriorated markedly," Bank of England Governor Andrew Bailey said on Tuesday at a news conference after the UK central bank published its Financial Stability Report. "Global financial conditions as a whole have tightened significantly."

Investors on Wednesday will read through the minutes of the US Federal Reserve's meeting last month for further insight into the Fed's view of the US economy. The Fed pushed interest rates up by a whopping 75 basis points in its continued efforts to bring down soaring inflation.

A look at wage inflation will arrive in Friday's jobs report for June from the Labor Department.

Oil prices were lower. West Texas Intermediate crude lost 0.3% at $108.08 per barrel. Brent crude, the international benchmark, fell 1.6% to $111.69.

Gold slipped 0.1% to $1,799.50 per ounce. The 10-year yield rose 1 basis point to 2.90%.

Bitcoin declined 3.6% to $19,521.14.

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