Stock Market Today: Dow Retreats, Oracle Climbs

In midday trading, the

Dow Jones Industrial Average
was off 212 points, or 0.7%, while the

S&P 500
had fallen 0.5%; the

Nasdaq Composite
was up 0.1%. All three indexes had been up earlier in the morning, but the moves were nothing compared with Monday, when the S&P 500 fell nearly 4%.

The 10-year Treasury yield was trading at 3.45%, a touch above its Monday peak of 3.43%.

The moves in the Treasury market on Monday have indeed been shocking. The 2-year Treasury yield soared to just over 3.4% on Monday, the highest since 2007, and traded at about 3.41% Tuesday.

These movements have dented the stock market, which has watched the bond market reflect the likelihood that the Federal Reserve will lift interest rates quickly, rather than gradually, in response to inflation that doesn’t seem to be declining yet.

And that narrative got some more support Tuesday, as the producer price index for final demand rose 0.8% month-over-month in May, in line with expectations, but above the prior result of 0.4%. That means companies are seeing rising costs, one force prompting them to raise prices as they look to protect their profit margins. All three major U.S. indexes fell at least 5% over the past month through Monday’s close, during which time the 2 and 10 year yields surged.

For now, it seems bond yields just can’t come downward. There is still a high likelihood that the Fed will hike rates by three-quarters of a percentage point, rather than the previously-expected half-point, at its June 15 meeting. The fed funds futures market is reflecting a more than 90% chance of a three-quarters of a point hike, up from just a 35% probability a day ago. 

“Yesterday’s sharp cross-market sell off represents a market finally coming to terms with the painful steps that will be required to reduce the 40 year high inflation,” wrote Andrew Hollenhorst, Citigroup economist. “A 75 basis point [three-quarters of a point] rate hike is a real possibility at tomorrow’s FOMC meeting.”

Now, the next big move in markets might have to wait until the Fed’s announcement. It is now unlikely that the Fed will have the luxury of talking about slowing down the pace of rate hikes, and more likely that it will emphasize the need to cool down demand and inflation. Markets have generally begun to anticipate that.  

“The Fed almost has no choice now to hike by 75 (three quarters of a point),” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. 

Whether that brings a sharp move up or down in stocks isn’t clear. The S&P 500 and Nasdaq are already in bear markets, defined as 20% or worse declines. 

Those drops bring about some chance that the stock market will rally if it sees that the Fed isn’t delivering any worse news than what is anticipated. One possible outcome Wednesday afternoon: “A mild relief rally given the declines of the past few days,” Essaye wrote. 

To that point, the stock market looks like it is in an “oversold condition.” That means the selling can’t get much worse for the near-term, especially if news from the Fed isn’t worse-than-expected. More than 90% of Nasdaq stocks are in a bear market, according to Sentimentrader. Historically, that means stocks will post gains in the coming moths, the firm’s data show. 

Overseas, the pan-European

Stoxx 600
slipped 1.3%, and Tokyo’s

Nikkei 225
lost 1.3% to follow Wall Street lower from Monday.

While stocks were gaining,

Bitcoin
and other cryptocurrencies remained under pressure. The largest digital asset fell 7% over the past 24 hours to below $22,500, having traded around $30,000 as recently as late last week.

Here are six stocks on the move Tuesday:

After closing at a record low on Monday following an 11% slide,

Coinbase Global

(ticker: COIN) has risen 0.8% Tuesday. The cryptocurrency exchange as well as other companies exposed to digital assets have endured a brutal selloff. Software group

MicroStrategy

(MSTR)—which holds significant Bitcoin on its balance sheet—fell 25% Monday and has risen 8% Tuesday.

Oracle

(ORCL) stock has gained 9.5% after the company reported a profit of $1.54 a share, beating estimates of $1.37 a share, on sales of $11.8 billion, above exceptions for $11.6 billion. 

Continental Resources

(CLR) stock has jumped 13% after the company said it received a take-private offer from oil and gas entrepreneur Harold G. Hamm for $70 a share. 

Tractor Supply

(TSCO) stock has gained 0.8% after getting upgraded to Buy from Neutral at Bank of America. 

AstraZeneca

(AZN) stock has dropped 1.3% after getting downgraded to Neutral from Buy at UBS. 

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Jack Denton at jack.denton@dowjones.com