Stock Market Today: Stocks End Lower Ahead of Major Inflation Update

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Broader markets bounced around Tuesday as investors waited for guidance from a pair of impending market catalysts: the latest inflation data and the start of second-quarter earnings season.

As for tomorrow morning's release of the June consumer price index (CPI), "it does seem that the market is pretty well prepared for a hot number at least from a headline perspective," says Michael Reinking, senior market strategist for the New York Stock Exchange. "Street estimates are calling for headline CPI to be up more than 1% on a monthly basis, with some calls that the year-over-year increase could be as high as 9%."

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Reinking adds that a big driver of inflation will likely be oil prices, which peaked in the middle of the month and have moved sharply lower since. Indeed, U.S. crude futures plummeted 7.9% today to settle at $95.84 per barrel as China's latest round of COVID-related restrictions sparked concerns over slowing oil demand, and are now down more than 21% from their June peak above the $122 per-barrel mark.

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Not surprisingly, energy (-2.0%) was the worst performing sector today, with APA (APA, -5.2%) and Occidental Petroleum (OXY, -3.6%) among the biggest decliners.

The weakness in energy stocks weighed on the broader S&P 500 Index (-0.9% at 3,818), while the Nasdaq Composite also finished lower (-1.0% at 11,264). The Dow Jones Industrial Average, meanwhile, spent most of the day higher as blue chip Boeing (BA) jumped 7.4% on solid Q2 delivery data, but ended the day down 0.6% at 30,981.

Other news in the stock market today:

The small-cap Russell 2000 gave back 0.2% to end at 1,728.
Gold futures shed 0.4% to settle at $1,724.80 an ounce.
The rout in Bitcoin continued, with the cryptocurrency falling 5.3% to $19,397.89. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
Gap (GPS) fell 5.0% today after the retailer said CEO Sonjia Syngal is stepping down, effective immediately. The company also expects its adjusted operating margin percentage to be zero to slightly negative in the second quarter due to higher promotional activity. "While the macro is far from good today, the majority of these issues appear to be self-inflected and centered on Old Navy," says Wells Fargo analyst Ike Boruchow, who downgraded GPS stock to Equalweight from Overweight (the equivalents of Hold and Buy, respectively. "As such, as we remain cautious on our space. We simply cannot continue to recommend a name that is juggling company specific challenges on top of growing macro pressure."
American Airlines Group (AAL) soared 10% after the air carrier said it is guiding for a pretax profit of $585 million in its second quarter. The news created a halo effect for other travel stocks, with Delta Air Lines (DAL, +6.2%) and United Airlines Holdings (UAL, +8.1%) among those gaining ground.

Don't Give Up on Consumer Discretionary Stocks

Higher inflation will likely continue to weigh on how consumers are feeling about the economy – as well as their willingness to open their wallets. While the latest credit and debit card spending data from BofA Data Analytics shows that total retail spending, excluding auto, was up 25% in June over the same period in 2019, it also revealed that most of this rise was due to higher prices. In fact, all categories they track outside of jewelry were down on a month-to-month basis.

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This, of course, is creating headwinds for many consumer-facing companies, which are only being compounded by dwindling COVID-related stimulus, rising input costs and worker shortages, says Wells Fargo Advisors analyst Brian Postol.

But not all hope is lost, and Postol believes "blue skies are faintly appearing in the distance, and brighter days will return." The analyst sees demand building across many pockets of the consumer discretionary sector, including automotive retail and e-commerce.

And with the sector down more than 30% so far in 2022, investors have plenty of opportunity to find some solid consumer discretionary plays at a bargain. Read on as we explore the best consumer discretionary stocks to buy for the rest of 2022.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.