Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 13, 2022. REUTERS/Brendan McDermid
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- JPMorgan, Morgan Stanley report missed profit
- PPI jumped more than expected in June
- Conagra Brands falls on poor forecast
- Dow down 0.46%, S&P down 0.30%, Nasdaq up 0.03%
NEW YORK, July 14 (Reuters) – The S&P 500 (.SPX) pared early losses to close modestly lower on Thursday as investors digested disappointing quarterly results from two major U.S. banks and hotter-than-expected inflation data.
Initially, all three major U.S. stock indexes sold off sharply following second-quarter earnings from JPMorgan Chase & Co and Morgan Stanley ( MS.N ). Both reported falling profits and warned of an impending economic slowdown.
Losses pared as the session progressed, with rising microchip stocks ( .SOX ) helping to push the Nasdaq Composite Index to a nominal gain.
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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 has warned that there is uncertainty in the market, but if you are alive and breathing, you know there is uncertainty in the market.”
JPMorgan Chief Executive Jamie Dimon struck a cautious note about the global economy as Morgan Stanley’s investment banking arm struggled to cope with a slump in global deals. Read more
Shares of JPMorgan Chase and Morgan Stanley fell 3.5 percent and 0.4 percent, respectively, while the S&P Banks Index ( .SPXBK ) lost 2.4 percent.
Worries about a slowdown intensified as the Labor Department’s producer price index report echoed Wednesday’s consumer price index data, showing hotter-than-expected inflation in June.
The sell-off began to ease after Fed Governor Christopher Waller said he supported another interest rate hike of 75 basis points in July, allaying worries of an even bigger hike of 100 basis points.
“The Fed will raise rates by 75, but they don’t have to,” 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 it’s almost as if their third term should be behind the curve,” Hatfield added.
On Wednesday, chances of a bigger increase rose after the CPI report, given the central bank’s intention to aggressively tackle decades-high inflation, a prospect that increases the chances of an economic contraction.
“There will be a recession, but a mild one,” said Oliver Pourche, senior vice president at Wealthspire Advisors, in New York. “The key component is the continued strength of the labor market. Given where we are in the employment picture, it’s not an immediate threat.”
Core inflation, which strips out food and energy prices, continued to decline from a peak in March, although it remains well above the central bank’s average annual target of 2%:
The Dow Jones Industrial Average (.DJI) fell 142.62 points, or 0.46%, to 30,630.17, the S&P 500 (.SPX) lost 11.4 points, or 0.30%, to 3,790.38, and the Nasdaq Composite (.IXIC) added 3.60 points, or 0.03%, to 11,251.19.
Eight of the S&P 500’s 11 major sectors ended the day in negative territory, with financials (.SPSY) suffering the biggest percentage loss, falling 1.9%.
Tech (.SPLRCT) was the biggest gainer.
With earnings season officially underway, analysts expect aggregate S&P 500 second-quarter earnings growth of 5.1% on a year-over-year basis, much less than the 6.8% forecast at the start of the quarter, according to Refinitiv.
U.S.-listed shares of Taiwan Semiconductor Manufacturing rose 2.9 percent after the chipmaker’s upbeat earnings guidance. Read more
Conagra Brands ( CAG.N ) tumbled 7.2% after issuing a full-year earnings forecast that fell short of estimates.
Declining issues outnumbered advancing ones on the NYSE by a ratio of 3.11 to 1; on the Nasdaq, a ratio of 2.12 to 1 favored the 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.
Volume on US exchanges was 10.86 billion shares, compared to the 12.48 billion average over the past 20 trading days.
(This story corrected to add missing word in paragraph 13)
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Reporting by Stephen Culp; Additional reporting by Amruta Khandekar in Bengaluru; Editing by Richard Chang
Our standards: The Thomson Reuters Trust Principles.
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