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U.S. stocks were little changed on Tuesday morning, after the June Consumer Price Index showed inflation remained hot, while corporate earnings season got under way with banking heavyweights reporting results.
Shortly after the open, the
was down 25 points, or 0.1%, while the
and the
were little changed. The Dow, S&P 500, and Nasdaq all set fresh records on Monday.
U.S. consumer prices rose 5.4% in June from a year ago, above expectations and the largest increase since 2008. Bond yields rose slightly after the report.
The 10-year Treasury yield rose as high as 1.38% after the inflation data was released, and most recently traded at 1.36%. The yield fell below 1.30% last week, causing stocks to sell off, as investors started to consider the eventual calming of economic growth from its current rapid pace and what that means for fiscal and monetary stimulus. Now, however, investors will likely be watching if hotter-than-expected inflation will prompt the Federal Reserve to push up their timeline for interest-rate increases.
In Asia, Tokyo’s
rose 0.5%, while Hong Kong’s
climbed 1.6%. The
lifted 0.5%. The
in London added 0.1% as the pan-European
was flat. The
in Paris rose 0.1% and Frankfurt’s
added 0.1%.
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Henry Allen, a strategist at Deutsche Bank, called CPI “one of the most important data prints for markets over the last couple of months, with big implications for the Federal Reserve as well as the success of the reflation trade.”
“The last couple of releases have both surprised to the upside, which in turn prompted the Fed to shift in a hawkish direction and pencil in a couple of rate hikes for 2023,” said Allen, noting that economists at the German bank expect CPI to rise 0.54% on a month-on-month basis.
“The focus will also be on the report’s details as to whether the price pressures are coming from areas associated with the reopening and are more likely to be transitory, or whether they’re spreading to other categories that could signal a more permanent increase,” Allen said.
In April, a CPI reading vastly exceeding expectations was due, in large part, to reopening quirks and idiosyncrasies in the used-car market, Barron’s reported.
“The question of whether this will prove transitory or permanent has been one of the biggest debates in economics recently,” Allen said. “Particularly as U.S. inflation at 5.0% year-on-year is running at its fastest pace since the financial crisis, whilst core inflation of 3.8% is at its highest since 1992.”
& Co. (ticker: JPM) stock fell 0.6% after the company reported a profit of $3.78 a share, beating estimates for $3.21 a share, on revenue of $31.4 billion, above expectations for $29.9 billion.
Group (GS) stock fell 0.5% after the bank reported quarterly earnings of $15.02 a share, beating estimates for $10.24, on revenue of $15.4 billion, above expectations for $12.17 billion.
British bank stocks got a boost after the Bank of England scrapped its Covid-19 pandemic-era restrictions on bank dividends and share buybacks, saying its stress test showed the sector was resilient enough to handle any more economic shocks from Covid-19. Shares in
HSBC,
and
jumped in London.
(PEP) stock rose 1.8% after the beverage giant said it earned $1.72 a share in the latest quarter, beating estimates for $1.53, on sales of $19.2 billion, above expectations for $17.9 billion.
stock climbed after the Finnish telecommunications group said it expects to revise upwards its prior guidance for 2021 when it reports quarterly earnings at the end of the month. The U.S.-listed shares in Nokia were up 8.6%.
(BA) dropped 3%, even after the stock was upgraded to Peer Perform from Underperform at Wolfe Research.
(UAL) stock dropped 1.7% after getting downgraded to Hold from Buy at Argus.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
