Shares gave initial gains and closed lower on Tuesday as investors weighed in on new quarterly earnings reports and a rise in inflation for large U.S. companies.
The S&P 500 fell 0.4 percent as most benchmark companies lost ground. Banks, industrial stocks and companies based on consumer spending have experienced a large share of the decline.
Technology stocks outperformed the trend, helping them cope with a wider range of slides. Shares of small businesses suffered some of the biggest losses.
The decline brought the stock market indices below the record highs set earlier in the day. Treasury yields rose.
Investors measured quarterly earnings reports from Goldman Sachs, JPMorgan Chase, PepsiCo and other large companies. They also got another picture that inflation continues to show in the economy, as the rapid rise in consumer demand and supply cuts translates into higher consumer goods prices.
A recent U.S. Department of Labor report in June showed another rise in consumer prices that surprised economists.
“You had an incredible element of earnings in the last quarter, but there were some questions in some of the comments that came out,‘ Okay, what with the cost pressures going forward? ’” Said Alan McKnight, investment director at Regions Asset Management. “Then you compare it to the inflation report today. We see another high letter.”
The S&P 500 fell 15.42 points to 4,369.21 points. The Dow Jones Industrial Average fell 107.39 points to 0.3 percent from 34,888.79. The Nasdaq Composite Technology Index fell 55.59 points or 0.4 percent to 14,677.65, while the Russell 2000 index for small businesses lost 42.96 points, or 1.9%, to 2,238.86.
Inflation has been a constant concern for the markets as investors try to figure out how it will affect the economic recovery trajectory from the coronavirus pandemic to the actions the Federal Reserve will take to address it.
The Department of Labor said Tuesday that U.S. consumer prices rose the most in June in 13 years, and extended the extension of rising inflation on Wall Street that the Federal Reserve could consider withdrawing and lowering low interest rate policies. buy a bond sooner than expected.
A large part of the increase in commodity prices, such as used cars, is mostly related to rising demand and lack of supply. The prices of many items, such as wood and other raw materials, will be eased or made easier as suppliers continue to increase operations, said Jamie Cox, a partner at Harris Financial Group.
“That’s a problem and it appears in all sorts of places but it won’t last forever,” Cox said.
The major companies opened the final round of corporate profits as investors listened intently to find out how the companies have performed in the recovery and how they are developing for the rest of the year.
Goldman Sachs fell 1.2 percent despite providing the second-best profit for the quarter in investment bank history. JPMorgan Chase is down 1.5 percent after investing in a mixed report with good earnings but lower revenues as interest rates have fallen in the past three months.
“Finance has seen a real increase in rates,” McKnight said. “We already have the price. Now it’s almost a ‘show me’ story. Can you really prove that you can make a profit in much higher clips if you return to a more normalized environment?”
Conagra Brands fell 5.4 percent in the S&P 500’s biggest drop after Chef Boyardee and other packaged food brands gave investors a weak financial forecast, citing inflationary pressures. Fastenal, a manufacturer of industrial and construction connectors, expects higher inflationary pressures on product and transportation costs. Stocks fell 1.6%.
Bond yields reversed from the start of trading and rose to 1.42 per cent from late Monday’s 1.36 per cent. Overall, yields have fallen in recent months after a sharp rise at the beginning of the year.
The quieter bond market is partly showing greater confidence that rising inflation will be temporary and will be largely linked to economic recovery.
“This narrative is fairly well-anchored and the bond market is not afraid to reduce or increase Fed rates,” Cox said.
Strong profits helped some companies make profits. PepsiCo rose 2.3 percent in Wall Street after surpassing earnings and revenue forecasts in the second quarter.
Boeing fell 4.2 percent after the company announced a reduction in production of a large 787 aircraft due to a new structural defect in some aircraft that were not delivered to airlines by customers.