The Dow Is Set to Slip, BP Is Rising—and What Else Is Happening in the Stock Market Today

Investor sentiment has weakened ahead of Pelosi’s (D., Calif.) expected visit to Taiwan Tuesday as part of her tour of Asia—a historic visit that has raised geopolitical tensions amid warnings from China. The world’s second-largest economy considers the island part of its territory and has plans for reunification, and cautioned that its armed forces “will not sit idly by” in the case of Pelosi’s visit.

In addition to heightening tensions between the U.S. and China, the House speaker’s visit underscores the economic sensitivity of Taiwan, which stands at the heart of the critical global chip-making industry.

“Speaker Pelosi is scheduled to land in Taiwan later this morning despite repeated and stern warnings from China about a potential military response to the visit and the elevated tensions are resulting in equity market weakness and rising demand for havens assets such as Treasuries,” said Tom Essaye, the founder of Sevens Report Research. “Looking beyond geopolitics, there are a few other potential catalysts to watch today.”

Tuesday also holds economic data in the form of motor vehicle sales for July and the JOLTs job openings for June, which comes ahead of this week’s headline U.S. jobs report on Friday. The strength of the economy remains in sharp focus among investors amid ongoing fears of a slowdown spurred by an aggressive shift in monetary policy from the Federal Reserve. 

Facing the highest inflation in decades, the Fed has already raised interest rates four times this year—including 75 basis-point rate hikes in both June and July, marking the largest increases since 1994. The central bank is expected to continue trying to tame red-hot prices with tighter policy, but risks sending the U.S. into recession as a result of denting economic demand.

“Last week’s late rally was helped by a shift in expectations about the likely glide path of future U.S. Federal Reserve rate rises, and the feeling that we are perhaps closer to the end of the Fed’s rate hiking cycle than was thought to be the case just over a week ago,” said Michael Hewson, an analyst at broker CMC Markets.

Expectations that the Fed will cool down on rate hikes this year, and even lower rates in 2023, helped U.S. Treasury yields decline last week, easing some of the pressure on stocks, which are sensitive to bond yields. A fall in yields—which move inversely to prices—continued Tuesday as investors looked to safer assets, with the yield on the 10-year U.S. Treasury note down to 2.56% from near 2.7% at the start of the week.

“In whatever way the market chooses to interpret the move in U.S. 10-year yields, it looks even more likely that we could well see further falls toward 2.5%, on the way to a possible move toward 2%,” said Hewson.

Here are two stocks on the move Tuesday:

BP (ticker: BP
) gained 2% in U.S. premarket trading as the group became the latest oil giant to report its best quarter in years amid soaring energy prices. BP saw adjusted profit surge to $8.5 billion in the prior quarter, up from $2.8 billion in the year prior and well ahead of analysts’ expectations.

Taiwan Semiconductor Manufacturing Co.
(TSM) lost 2.5% in the premarket after a 2.5% tumble Monday, as shares in the world’s largest chip maker weakened ahead of Pelosi’s visit to Taiwan.

DuPont de Nemours (DD) lost 2.5% in the premarket, even after the materials science giant reported second-quarter adjusted profit per share of 88 cents from $3.3 billion in sales, outpacing Wall Street’s expectations of 75 cents in per-share profit from revenue of $3.25 billion.

Write to Jack Denton at jack.denton@dowjones.com