After sifting through hotter-than-expected U.S. consumer-price index data and parsing quarterly results from some of the country’s top banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., U.S. stocks finished lower Tuesday. What happened to stock benchmarks?
The Dow Jones Industrial Average DJIA, -0.31 percent finished at 34,888.79, down 107.39 points, or 0.3 percent.
The S&
The Nasdaq Composite COMP, -0.38 percent dropped 55.59 points, or 0.4 percent, to 14,677.65 points.
The Russell 2000 index RUT, -1.88 percent, which tracks small-cap stocks, fell 1.9 percent today.
For the second straight day, all three major indexes finished at all-time highs, with the Dow narrowly missing its first close above 35,000, advancing 0.4 percent to a record 34,996.18.
What was the market’s driving force? Stocks fell on Tuesday as investors absorbed inflation data and the outcomes of a 30-year Treasury note auction that were “not favorably welcomed,” according to Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. Investors were presumably asking why they should accept a 30-year bond rate below that level in an atmosphere where the Fed is willing to tolerate inflation of 2%, Samana said in an interview Tuesday. After the auction, the stock market began to fluctuate, reacting to the spike in 30-year Treasury yields, he added. According to MarketWatch, CPI statistics released Tuesday indicated that the cost of living increased by the most since 2008. In June, the consumer price index in the United States increased by 0.9 percent. The core reading, which excludes volatile food and energy expenses, increased 0.9 percent as well. Both indicators were predicted to rise by 0.5 percent. The headline CPI increased by 5.4 percent year over year in June, while the core rate, which excludes food and energy expenses, increased by 4.5 percent, the largest increase since September 1991 and well above the forecast of 3.8 percent. In a phone interview Tuesday, Michael Loukas, CEO of TrueMark Investments, said, “All you have to do is go food shopping or fill your car up with petrol to know there’s inflation.” He answered, “We all know it’s out there.” “It’d be like burying your head in the sand if you were astonished by this.” While the economic data is expected to stoke debate about whether the Federal Reserve is behind the curve on inflation by claiming that rising prices are a “transitory” phenomena, market fears of a bout of runaway inflation appear to remain in control for the time being. According to Thomas H. Kee, CEO of Stock Traders Daily, investors generally expect inflation, like earnings growth, to peak soon. “Reasonably hot inflation statistics should still be expected,” he wrote in a note, “but if inflation is equivalent to the market’s projected adjustment in earnings growth rates, the next edition of CPI will be tamer.” “It will be a more serious issue if the CPI figure is this hot next time.” In an interview on Tuesday, Kristina Hooper, chief global market strategist at Invesco, said she still believes “inflation is primarily transitory.” According to the most recent CPI statistics, rising costs are “concentrated in areas that correspond with the reopening,” as Hooper pointed out. Hooper also believes the economy will continue to improve this year, with a “pandemic revival” now being the largest tail risk for the stock market, according to her. On Tuesday, growth stocks outperformed value stocks. According to FactSet, the Russell 1000 Growth index RLG, -0.18 percent declined roughly 0.2 percent, while the Russell 1000 Value index RLV, -0.77 percent fell nearly 0.8 percent. “Growth is a drug that the market is addicted to. At TrueMark, Loukas stated, “It’s just the way it is.” “It was asking for expansion even when the value rotated.” He believes that investors are leaning to secular growth stocks as a hedge against inflation. Okta Inc. OKTA, +1.44 percent, a secular growth stock Loukas loves, is in cybersecurity and defied the stock market’s downward trend on Tuesday. According to FactSet statistics, Okta’s stock rose 1.4 percent. Samana continues to favor cyclical bets in the stock market, such as industrials, energy, financials, and materials, according to Wells Fargo. “That’s what we’d be purchasing today,” he told MarketWatch on Tuesday afternoon, adding that equities in such sectors should do well as the economy recovers amid greater inflation and rising rates. Recent high inflation is due in large part to supply interruptions as demand rises with the reopening of the economy, but some economists warn that if pricing pressures do not reduce soon, the US recovery may be put under much greater strain. Members of the Federal Reserve have been predicting that inflation will fall quickly as the US and global economies find a more normal footing, citing pricing pressures that are largely due to temporary supply shortages that will disappear as supply catches up to demand. The robust June inflation reading was predicted, according to Fed’s Daly, and higher prices won’t stay. In other economic news from the United States on Tuesday, the National Federation of Independent Business said that its small-business index surged to its highest level in eight months in June. The index rose 2.9 points to 102.5, breaking through the 100-point barrier for the first time since November. For the first time this year, it had fallen in May. From the outset of the second-quarter earnings reporting season, stock market investors were looking for clues. JPMorgan Chase & Co. JPM, -1.49 percent and Goldman Sachs Group Inc. GS, -1.19 percent, both banking behemoths, reported earnings early Tuesday that surpassed expectations. JPMorgan Chase’s stock dropped 1.5 percent after the bank reported a profit that more than doubled but a drop in revenue. Goldman shares first soared after exceeding profit and revenue projections and increasing its dividend by 60%, but later fell 1.2 percent to conclude 1.2 percent down. Both banks are Dow Jones Industrial Average participants. In addition, St. Louis Fed President James Bullard said Tuesday that the Fed should begin lowering the stimulus it provides to the US economy, but he stressed that the decrease didn’t have to begin right away. “I think the moment is appropriate to roll back emergency measures now that the economy is growing at 7% and the pandemic is getting better and better under control,” he told The Wall Street Journal in an interview published Tuesday. Which businesses were the subject of the investigation?
The CDC stated it has received reports of 100 persons suffering Guillain-Barré syndrome after receiving the Johnson & Johnson JNJ vaccine. Guillain-Barré syndrome is an immune system illness that can cause muscle weakness and paralysis. The stock finished 0.1 percent lower.
Conagra Brands Inc. CAG, -5.43 percent had its stock drop 5.4 percent as the food giant warned of inflationary pressures in the first quarter of fiscal 2022.
PepsiCo Inc. (NYSE: PEP) saw its stock rise 2.3 percent after the beverage and snack giant announced profit and revenue that above forecasts in the second quarter and given an enthusiastic full-year outlook.
Organigram Holdings Inc. OGI, a Canadian cannabis firm, reported a lesser loss in its fiscal third quarter than in the same period a year ago, thanks to sales that exceeded expectations.
The stock increased by 10.9 percent.
Altus Power Inc., a Connecticut-based sustainable energy ecosystem firm, is going public through a merger with CBRE Acquisition Holdings Inc. CBAH, a special-purpose acquisition company. The merged company is valued at $1.58 billion. CBAH’s stock increased by 1.1 percent. Boeing Co. BA, -4.23 percent shares fell 4.2 percent after the aerospace company announced that it has identified extra work that has to be done on its undeliverable 787s, postponing delivery until the end of 2021.
What happened in other markets?
The 10-year Treasury note rate increased by 5.3 basis points to 1.415 percent.
The ICE U.S. Dollar Index DXY, +0.57%, which measures the currency against a basket of six main competitors, was up 0.6 percent.
Oil futures ended the session higher, with the US benchmark CL00, +1.50 percent up roughly 1.6 percent. Gold futures GC00, +0.10 percent also moved higher, finishing 0.2 percent higher.
The Stoxx 600 Europe SXXP, +0.03 percent increased less than 0.1 percent to a record closing in European markets. The FTSE 100 UKX, -0.01 percent in London dipped by less than 0.1 percent.
In Asia, Hong Kong’s Hang Seng Index HSI, +1.63 percent gained 1.6 percent, while Shanghai Composite SHCOMP, +0.53 percent and Japan’s Nikkei 225 NIK, +0.52 percent both gained 0.5 percent.
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This article was written with the help of Mark DeCambre./n
