Stocks Finish Lower as U.S. Inflation Unexpectedly Jumps in June

Stocks closed lower Tuesday after consumer inflation rose unexpectedly in June and earnings season began on reports from JPMorgan Chase (JPM) – Get the report and Goldman Sachs (GS) – Get the report.

The Dow Jones Industrial Average lost 107 points, or 0.31%, to 34,888, the S&P 500 lost 0.35% and the Nasdaq lost 0.38%. All three indices hit the record closings they set on Monday.

The S&P 500 and Nasdaq hit intraday all-time highs on Tuesday.

The benchmark 10-year government bond yield rose to 1.408% on Tuesday after the surge in inflation and after an auction of $ 24 billion in 30-year debt saw subdued demand.

The consumer price index accelerated faster than expected in June, according to the Bureau of Labor Statistics, which further put pressure on the Federal Reserve’s view that soaring prices will ease early next year.

The consumer price index (CPI) was estimated to be 5.4% month-on-month in June, above the forecasts of economists and at its strongest since 2008. Core inflation rose from 3.8% to 4.5%.

“Each successive high rate of inflation will make it increasingly difficult for the Fed to remain accommodative,” said Mike Loewengart, managing director of investment strategy at E-Trade. “And on the front line of the markets, we could see some tug-of-war as traders offset economic data with strong bank profits starting to show.”

JPMorgan posted much stronger than expected results in the second quarter, thanks in part to the release of $ 3 billion in provisions for bad loans and a large increase in investment banking income.

Goldman Sachs’ profits beat Wall Street estimates due to higher wealth management and investment banking revenues.

Profit start, Trading GS and JPM, CPI, Lockheed Martin, Black Widow’s Model

Expectations that earnings will be strong in the second quarter boosted stocks on Monday as the three major benchmarks closed again at record highs. The Dow ended up just under 35,000.

Analysts surveyed by FactSet expect S&P 500 companies’ earnings to increase 64% in the second quarter compared to the same quarter of 2020, a time when business has been slowed significantly by the coronavirus pandemic. That would be the highest growth in more than a decade.

“We ran out of superlatives to describe Corporate America’s impressive performance during the first quarter reporting season. Despite high expectations, results exceeded expectations with one of the largest margins ever,” said Jeff Buchbinder, equity strategist, and Ryan Detrick , Chief market strategist for LPL Finanz.

“So what will companies do as a bonus? We expect more good news this quarter as more of the economy has opened up while recognizing that the second quarter will almost certainly be the peak of earnings growth for this cycle, ”they added.

The overall market isn’t nearly as strong as the S&P 500

James Bullard, the president of the St. Louis Federal Reserve Bank, told the Wall Street Journal that the central bank should begin withdrawing, if not immediately, the exceptional support it gave to the US economy during the pandemic.

“I think as the economy grows by 7% and the pandemic gets more and more under control, I think the time is right to pull the contingency measures back,” Bullard said in an interview.

source https://thedailytradingnews.com/stocks-finish-lower-as-u-s-inflation-unexpectedly-jumps-in-june/