U.S. stocks opened lower on Thursday as investors fretted over shock inflation data and reviewed earnings at some of Wall Street’s biggest banks.
The S&P 500 and Dow were down 1.9 percent shortly after the open, while the tech-heavy Nasdaq was down closer to 1.7 percent in early trade.
JPMorgan Chase ( JPM ) was in the spotlight early Thursday after it reported a bigger-than-expected 28% drop in second-quarter profit, attributing the decline to a $1.1 billion provision for loan losses amid concerns about a possible economic decline Shares fell as much as 5% in early trading on Thursday.
“In our global economy, we face two conflicting factors operating on different schedules,” said CEO Jamie Dimon. “The U.S. economy continues to grow, and both the labor market and consumer spending and spending power remain healthy. “
JPMorgan Chase CEO Jamie Dimon speaks at the 2019 North American Building Trades Unions (NABTU) Legislative Conference in Washington, U.S., April 9, 2019. REUTERS/Jeenah Moon
“But geopolitical tensions, high inflation, declining consumer confidence, uncertainty about how high interest rates should be and unprecedented quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its damaging impact on global energy and oil prices food is very likely to have negative consequences for the global economy in the future,” Dimon added.
Morgan Stanley ( MS ) reported results that missed analysts’ expectations, dampened mainly by a decline in investment banking revenue due to volatile market conditions. Shares fell more than 2% early Thursday.
Those results also weighed on the broader financial sector, sending shares of banking peers Citi ( C ) and Wells Fargo ( WFC ) down more than 2% in early trade ahead of their own gains on Friday.
The stock market moves came after all three major indexes fell on Wednesday following new CPI data that showed prices in the US economy rose at the fastest pace since 1981.
Elsewhere on Thursday morning, initial jobless claims rose last week in a potential sign that the labor market may cool as the Federal Reserve tightens financial conditions.
The story continues
Initial claims for U.S. jobless benefits rose to 244,000 in the week ended July 9, up 9,000 from the previous period, Labor Department data showed on Thursday morning. Economists polled by Bloomberg had expected the latest figure to reach 235,000.
The producer price index for final demand — a measure of wholesale and business prices — rose 11.3 percent year-on-year in June and 1.1 percent from the previous month, the Labor Department also said Thursday, underscoring inflationary pressure at the wholesale level.
Meanwhile, commodity markets remained under pressure due to growing concerns of a supply crunch. West Texas Intermediate (WTI) crude futures fell $2.24, or 2.33%, to $94.06 a barrel in early trade, and Brent crude fell $1.94, or 1.95%, to $97. 63.
“Markets had a shaky reaction after the shock inflation data, and the headline figure of 9.1% only makes things harder for the Fed,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “As a result, the Federal Reserve is likely to send a hawkish message at the July meeting, and it would be a mistake to think that there is a rate hike of less than 75 basis points.”
The blistering headline figure even sparked a flurry of speculation among strategists that a 100 basis point hike could now be on the way, a move that would mark the most combative monetary intervention since the early 1990s.
“Everything is in motion,” Atlanta Federal Reserve President Raphael Bostick told reporters in St. Petersburg, Florida on Wednesday. Asked if that included raising interest rates by a full percentage point, he said, “that would mean everything.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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