S&P 500, Dow close lower after bank earnings, inflation data

S&P 500, Dow close lower after bank earnings, inflation data
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  • JPMorgan, Morgan Stanley reported no profit
  • PPI rose more than expected in June
  • Conagra Brands downgrades
  • Dow rose 0.46%, S&P rose 0.30%, Nasdaq rose 0.03%

NEW YORK, July 14 (Reuters) – The S&P 500 (.SPX) Early losses closed slightly lower on Thursday after investors digested disappointing quarterly results from two major US banks and warmer-than-expected inflation data.

Initially, all three major U.S. stock indexes sold off sharply after second-quarter earnings from JPMorgan Chase & Co. and Morgan Stanley. (MS.N). Both declining profits and an expected economic slowdown were reported.

Losses narrowed as the session wore on, with microchip stocks advancing (.SOX) It helps the Nasdaq Composite Index earn a nominal profit.

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“There was an irrational response to the JPMorgan and Morgan Stanley results,” said Jay Hatfield, chief executive and portfolio manager at InfraCap in New York. “It was no surprise that investment banking was weak.”

“JPMorgan warned that there is uncertainty in the market, but if you’re alive and breathing, you know there’s uncertainty in the market.”

JPMorgan CEO Jamie Dimon sounded a cautious note about the global economy, with Morgan Stanley’s investment banking unit struggling to cope with a slowdown in global deals. read more

Shares of JPMorgan Chase and Morgan Stanley fell 3.5% and 0.4%, respectively, while the S&P Banks index (.SPXBK) It decreased by 2.4%.

Worries of a slowdown deepened as the Labor Department’s Producer Price Index report mirrored Wednesday’s Consumer Price Index data, showing warmer-than-expected inflation in June.

The sell-off began after Fed Governor Christopher Waller indicated in July that he supported another 75-basis-point interest rate hike and eased fears of an even bigger 100-basis-point hike.

“The Fed is going to raise rates by 75, but it shouldn’t,” Hatfield said. “The Fed has already done a lot to reduce inflation, but they won’t realize it until they see it in the rearview mirror.”

“The thing to remember about the Fed is that almost their third mandate is to be behind the curve,” Hatfield said.

On Wednesday, the prospect of a bigger hike rose after the CPI report, given the central bank’s intention to aggressively tackle decades of high inflation – a prospect that raises the chances of an economic contraction.

Traders work on the floor of the New York Stock Exchange (NYSE), in New York, U.S., July 13, 2022. REUTERS/Brendan McDermid

“There will be a downturn, but it will be moderate,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “A key component is continued strength in the labor market. Given where we are in the employment landscape, that’s not an immediate threat.”

Core inflation, which has dragged down food and energy prices, continues to decline from its March peak, although it remains well above the central bank’s average annual target of 2%:

Dow Jones Industrial Average (.DJI) The S&P 500 index fell 142.62 points, or 0.46%, to 30,630.17 (.SPX) The Nasdaq Composite lost 11.4 points, or 0.30%, to 3,790.38. (.IXIC) It added 3.60 points, or 0.03%, to 11,251.19.

Eight of the 11 major sectors of the S&P 500 finished the day in the negative. (.SPSY) It suffered the biggest percentage loss, falling 1.9%.

Tech (.SPLRCT) was the biggest winner.

With earnings season officially underway, analysts expect the S&P 500’s second-quarter earnings growth to be 5.1% on a year-over-year basis, according to Refinitiv, well below the 6.8% estimate earlier in the quarter.

US-listed shares of Taiwan Semiconductor Manufacturing rose 2.9% after the chip maker’s good earnings guidance. read more

Conagra brands (CAG.N) fell 7.2% after giving a lower-than-estimated annual profit forecast.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 3.11 to 1; A 2.12 to 1 ratio on the Nasdaq favored decliners.

The S&P 500 hit one new 52-week high and 44 new lows; The Nasdaq Composite recorded nine new highs and 294 new lows.

The volume of US stocks was 10.86 billion shares compared to an average of 12.48 billion shares in the last 20 trading days.

(This story amends paragraph 13 to add omitted word)

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Reporting by Stephen Kulp; Additional reporting by Amruta Khandekar in Bengaluru; Edited by Richard Chang

Our standards: Thomson Reuters Trust Principles.

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