Stock futures rise slightly after second-straight negative session

Meanwhile, the Nasdaq Composite lost 1.1%, to close at 11,883.14, and the Dow Jones Industrial Average slid 308.25 points, or 1%, to 31,790.87.

— Tanaya Macheel

Every sector in the S&P 500 was down on Tuesday and stocks continued their three-day sell-off. Financials trailed the other 10 sectors, down 0.2% on the day in the final hour of trading. Goldman Sachs, JPMorgan and American Express were in the green, albeit slightly.

Energy stocks continued to lead declines. The sector was last down 3.4%.

— Tanaya Macheel

The market downturn over the past week has been broad based, with decliners easily outnumbering the gainers in each of the past three trading sessions.

However, there have been some bright spots this year in even the most beaten down sectors.

CNBC Pro took a look at some of the best-performing stocks in the weakest sector this year, and found that many are well-liked by Wall Street analysts and beating the S&P 500. One notable name is T-Mobile, which is up more than 20% year to date.

Check out the rest of the list on CNBC Pro.

— Jesse Pound

Energy prices declined sharply on Tuesday, with gasoline futures closing at their lowest level since before Russia invaded Ukraine.

RBOB futures fell 6.37% to settle at $2.69 per gallon, a price last seen on Feb. 18.

West Texas Intermediate crude, the U.S. oil benchmark, dipped 5.5% to end the day at $91.64 per barrel. International benchmark Brent crude fell 5.5% to $99.31.

The semiconductor sector is underperforming on Tuesday, helping to drive down the Nasdaq Composite.

The VanEck Semiconductor ETF has shed about 2%, bringing its year to date losses back to more than 30%.

Chip giant Nvidia is one of the worst performers in the Nasdaq 100, sliding 3.8%. Advanced Micro Devices has dropped 3.3%.

Earlier on Tuesday, Citi said semis are entering their worst downturn in a decade.

— Jesse Pound

The possibility that the U.S. economy is headed for a recession over the next year has risen sharply, according to UBS.

In its latest economic forecasting, the bank’s economists and strategists say data is pointing toward a 60% chance of a recession ahead, up from 40% from the latest reading in June.

UBS measures three components: hard macro data, the yield curve across various Treasury maturities, and credit data such as nonperforming loans and feedback from the Federal Reserve’s Senior Loan Officers’ Survey.

Using data alone, “the probability of being in a contractionary phase is historically very high — 94% in July vs 35% in April — but in the current case, the US team’s modal forecast is that the contraction does not morph into a full-blown recession,” UBS said in a note.

The news also isn’t good when looking at Treasury yields.

A key part of the curve, comparing 10-year yields to 2-year, has been inverted since early July. The rest of the curve looking at 1- to 10-year maturities is “downward sloping, as it usually is prior to recessions,” UBS said. The chance of a recession from the bond space is now at 71%, up from 57% in July.

One bright spot is credit: the sector is showing just a 15% chance of recession, as metrics in that space still appear mostly positive.

The U.S. has seen two consecutive quarters of negative growth, a traditional recession sign, though the last word usually goes to the business cycle dating committee at the National Bureau of Economic Research. Most economists think the NBER will not rule the U.S. in recession for the first half of the year.

—Jeff Cox

The recent market downturn is starting to do some technical damage.

Tuesday’s losses pushed the S&P 500 back below its 50-day moving average, a key level watched by traders and strategists. It marked the first time since July 26 that the broad market index traded below that level.

Tuesday also marked the first time since July 28 that the S&P 500 broke below 4,000.

As stocks sell off for a third straight day, investors are still wrapping their heads around the comments made by Fed Chair Jerome Powell in Jackson Hole, Wyoming on Friday.

Rod von Lipsey, managing director at UBS Private Wealth Management, said investors “are coming to terms with the idea that the Fed is serious about curbing inflation, even as recent data suggests inflation is starting to decline.”

“We believe the market’s summer rally was ephemeral,” he added, “and continue to recommend that investors remain selective and focus on defensive stock sectors like health care and dividend-paying stocks.”

— Tanaya Macheel

Energy and utilities are the only S&P 500 sectors trading in positive territory as August nears an end.

While energy was the worst-performing sector on Tuesday and fell about 4% as of midday trading, it’s on track to end August with a 2.7% gain. Energy is also one of just two sectors currently trading in positive territory year to date – up more than 45%.

Meanwhile, utilities is on pace to end August 1.3% higher and is up about 4.6% since the beginning of January.

On the flip side, healthcare and information technology are currently leading August’s declines across the S&P 500’s sectors, down more than 5.1% and 5.7%, respectively, since the beginning of the month.

— Samantha Subin

Chris Hyzy, Bank of America Private Bank CIO, said on “Halftime Report” that investors should shift into defensive stocks now that Federal Reserve officials have pushed back on the market’s expectation for rate cuts in 2023.

“If it’s higher for longer, you really should be looking at high free cash flow areas, pricing power areas, demand that is going to hold up relative to supply,” Hyzy said.

Market expectations have shifted toward higher rates over the past week as central bankers, including Jerome Powell last Friday and John Williams on Tuesday, have reiterated the Fed’s commitment to fighting inflation. The CME FedWatch tool now shows that traders expect the Fed to hike rates to range of 3.75% to 4.00% by December, and to keep it at the level or hike even further in the first half of next year.

Hyzy did say he was bullish long-term but said the market would need a reset over the next six to nine months.

—Jesse Pound

Shares of restaurants slid on Tuesday after a California bill to set wages and workplace standards for the fast-food industry moved forward.

The state’s legislature passed a new bill on Monday, known as the FAST Act, that would create a panel to establish wages and safety conditions for fast food workers. Assembly Bill 257 now heads to the desk of Gov. Gavin Newsom.

Restaurant chains with a notable presence in California saw their shares dip on Tuesday. Shares of Jack in the Box fell 9.5%, while First Watch Restaurant Group shed about 2.7%. Chipotle Mexican Grill fell 1.8%.

–Darla Mercado

Home prices rose by 18% in June on a year-over-year basis, a slightly slower pace than the 19.9% annual gain seen in May, according to the S&P CoreLogic Case-Shiller Indices.

“It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip,” wrote Craig Lazzara, managing director at S&P Dow Jones Indices, in a release. “June’s growth rates for all three composites are at or above the 95th percentile of historical experience. For the first six months of 2022, in fact, the National Composite is up 10.6%.”

— Fred Imbert, Diana Olick

Shares of electric vehicle company Lucid Group were under pressure on Tuesday after the company indicated that it planned to raise more capital.

Lucid on Monday filed a shelf registration statement with the Securities and Exchange Commission that said the company planned to raise up to $8 billion over the next three years. The capital raises could include common stock or debt, among other options.

The company said it is not selling any securities at this time but that the filing will “provide greater flexibility to raise capital in the future.”

Shares of Lucid were last down 6.7%.

— Jesse Pound

Oil companies dragged the S&P 500 on Tuesday, fueled by declines in energy prices.

Shares of Halliburton, Diamondback Energy and Marathon Oil were the top decliners in the broad market index. Halliburton slid more than 5%, while Diamondback and Marathon shed more than 4% each. Chevron shares fell more than 2%, making it the top decliner in the Dow Jones Industrial Average.

Oil prices also slumped. Brent crude futures fell about 5%, dipping below $100 a barrel. West Texas Intermediate crude futures for October delivery tumbled more than 4% to $92.54 a barrel.

–Darla Mercado

The Conference Board’s consumer confidence index came in at 103.2 for August, up from a July print of 95.3 and above a StreetAccount estimate of 97.4. It also marked the index’s first gain after falling for three straight months.

“The Present Situation Index recorded a gain for the first time since March. The Expectations Index likewise improved from July’s 9-year low, but remains below a reading of 80, suggesting recession risks continue. Concerns about inflation continued their retreat but remained elevated,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

— Fred Imbert

Historically, the market could count on the Federal Reserve to step in with easy policy to help limit big losses in equities, which has been known since the days of former Fed Chair Alan Greenspan as “the Fed put.” But that lifeline could be dead, for now, according to Scott Ladner, chief investment officer at Horizon Investments.

“Bad economic news is once again bad market news,” he said. “In an environment where you believe the Fed will pivot to a more dovish policy if the economy weakens, bad economic news can be interpreted bullishly because it speeds the time of such a dovish pivot.”

“In an environment where the Fed has been clear that they will sacrifice the economy (to what extent, still unknown) to squash inflation, that stance no longer makes sense and bad economic news just increases the chance of recession which decreases earnings potential without the possibility of a Fed backstop,” he added. ” Said another way, the ‘Fed put’ is currently dead.”

— Tanaya Macheel

Stocks opened higher on Tuesday as the major averages attempted to avoid a third straight day of losses. The Dow Jones Industrial Average traded 88 points higher, or 0.3%. The S&P 500 advanced 0.3%, and the Nasdaq Composite added 0.6%.

The stock indexes are still on pace for a down month.

— Tanaya Macheel

Morgan Stanley says investors should bet on Palo Alto Networks, the first cybersecurity company it expects to hit a $100 billion market capitalization over the next two years.

“Our team believes PANW continues to set itself apart by delivering another quarter of over-30% current billings growth in the July quarter (F4Q), and an initial FY23 billings outlook for 20%-plus growth that was ~5% ahead of consensus,” wrote Katy Huberty, the bank’s director of equity research in a note to clients.

Morgan Stanley analysts believe the company retains a strong and growing position in the hybrid cloud environment, guided by growth in its next-generation security billings. They expect those billings to account for about half of total billings in the 2025 fiscal year compared to a third today.

Shares of the cybersecurity company are trading flat for the year, rising 12% this month. The stock sits about 13% off its 52-week high.

— Samantha Subin

Citi believes semiconductors are entering their worst downturn in a decade. 

The firm cited “the recession and inventory build,” in a note Tuesday, pointing to the PC and handset slowdown and the expectation of more cancellations in the auto and industrial markets.

“We maintain our belief that every company/end market will correct and we expect the SOX index to hit new lows and fall another 25%,” analyst Christopher Danely said. 

Roughly 15% will be driven by multiple correction and another 10% by EPS cuts, he added. 

Stock buybacks by corporate clients accelerated last week, hitting their highest weekly level since early January, Savita Subramanian of Bank of America wrote in a Tuesday note.

Some of this is likely due to the 1% tax on buybacks set to start next year due to the Inflation Reduction Act, signed into law in August.

So far this year, “corp. client buybacks as a % of S&P 500 market cap are tracking slightly above last year’s levels at this time (0.15% vs. 0.14%) though still below 2019 (pre-COVID) levels (0.23%),” Subramanian wrote.

Earlier in the month, Goldman Sachs’ David Kostin noted that the IRA tax on buybacks would likely create a headwind for share repurchases next year but could boost them for the remainder of 2022. This gives investors a chance to play the trend in the coming months by snapping up shares of companies likely to buy back their own stocks, sending prices higher.

Read more on CNBC PRO.

— Carmen Reinicke

Oil prices moved lower during morning trading on Wall Street as global growth concerns pressured prices.

West Texas Intermediate crude futures, the U.S. oil benchmark, shed 2.7% to trade at $94.38 per barrel. International benchmark Brent crude declined 3.4% to $101.47 per barrel.

WTI gained 4.24% during Monday’s trading, with Brent advancing 4.06%.

OPEC and its oil-producing allies will meet next week, with the Street not ruling out production cuts.

“As the masters of monetary policies turn from quantitative easing to quantitative tightening the central bank of the oil market goes the other way and plans to launch its own stimulus measures – tightening the production screw,” PVM’s Tamas Varga wrote in a note to clients.

— Pippa Stevens

Elon Musk’s legal team has filed another notice to terminate the Tesla CEO’s $44 billion deal to buy Twitter, citing additional reasons to scrap the deal.

That follows allegations from earlier this month by Twitter’s former head of security about “extreme, egregious deficiencies” by the social media firm related to privacy, security and content moderation.

Twitter shares fell about 1% in early morning trading.

— Arjun Kharpal, Tanaya Macheel

Baidu traded 2% higher in the premarket after the Chinese tech company reported quarterly results that beat analyst expectations.

The company earned RMB15.79 per share on revenue of RMB29.65 billion. Analysts expected a profit of RMB10.42 per share on revenue of RMB29.3 billion, according to Refinitiv.

“Despite a challenging macro environment caused by Covid-19, Baidu Core generated RMB23.2 billion in revenues in the second quarter, while Baidu AI Cloud revenues maintained rapid growth momentum of 31% year over year and 10% quarter over quarter,” CEO Robin Li said in a statement.

— Fred Imbert

Shares of Bed Bath & Beyond popped more than 12% in the premarket as traders look ahead to the company’s strategic update later this week. The gain would build on a 24% rally seen Monday. The company’s stock has more than doubled in August, though it’s still down 53% over the past 12 months.

— Fred Imbert

The U.S. will be going into a recession unless a “miracle” happens, said Stephen Roach, who was formerly chair of Morgan Stanley Asia.

“We’ll definitely have a recession as the lagged impacts of this major monetary tightening start to kick in,” he told CNBC’s “Fast Money” on Monday. “They haven’t kicked in at all right now.”

“The unemployment rate has got to go probably above 5%, hopefully not a whole lot higher than that. But it could go to 6%,” Roach added.

— Jihye Lee, Stephanie Landsman

A “seasonally weak” period for equities is just around the corner, and that could mean more volatility for stock markets.

But King Lip, chief strategist at BakerAvenue Wealth Management, believes one FAANG stock could be a safe bet.

Pro subscribers can read the story here.

— Zavier Ong

Stocks burning through cash are about to get hit, says David Trainer, CEO of investment research firm New Constructs.

That’s because interest rates are going to get even higher, which means liquidity will start to dry up, he explained

He tells investors to avoid “zombie” stocks and identifies stronger bets.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Even though Monday was another negative day for stocks, the moves under the surface showed a more orderly market than on Friday.

Declining stocks on the New York Stock Exchange outnumbered advancing names on a 2-to-1 basis.

That is not a great results for bulls looking for a rebound, but it is an improvement over the 6-to-1 ratio from Friday.

— Jesse Pound, Christopher Hayes

After falling for much of July and August, the price of oil is starting to make a comeback.

Oil prices settled up more than 4% on Monday, and futures for U.S. benchmark West Texas Intermediate crude is now trading above $96 per barrel again.

The volatility in oil prices reflects uncertainty about supply, with the Russia invasion of Ukraine ongoing and OPEC+ considering output cuts, and demand, with growing concerns about a global recession.

Lower oil prices were also a major reason for cooler inflation readings for the U.S. in recent weeks.

— Jesse Pound

Monday’s market decline deepened the major averages’ losses for August.

With just two sessions to go in August, here’s where the averages stand for the month and relative to key levels.

The Dow is:

• down 2.27% for the month
• 7.39% above its June low

The S&P 500 is:

• down 2.41% for the month
• 9.92% above its June low

The Nasdaq Composite is:

• down 3.01% for the month
• 12.88% above its June low

— Jesse Pound