The S&P 500 and Nasdaq ended lower on Tuesday after hitting record highs earlier in the session, with investors digesting a jump in U.S. consumer prices in June and earnings from JPMorgan and Goldman Sachs that kicked off the quarterly reporting season. The TSX ended up modestly with the help of rallying pot and gold stocks.
The S&P 500 and Nasdaq reached fresh record highs but quickly fell into negative territory after an auction of 30-year Treasuries showed less demand than some investors expected and pushed yields higher.
Data indicated U.S. consumer prices rose by the most in 13 years last month, while so-called core consumer prices surged 4.5% year over year, the largest rise since November 1991.
Economists viewed the price surge, driven by travel-rated services and used automobiles, as mostly temporary, aligning with Federal Reserve Chair Jerome Powell’s long-standing views.
“Any time you get an uptick in interest rates the stock market is going to get nervous, especially on a day like today,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The S&P 500 growth index dipped 0.05%, while the value index fell 0.70%.
“With growth outperforming value, the takeaway is clearly that inflation from a market perspective is not a real threat in the long term,” said Keith Buchanan, a portfolio manager at GLOBALT Investments in Atlanta, Georgia.
Benchmark 10-year yields jumped to 1.415%, after getting as low as 1.343% earlier on Tuesday.
The S&P/TSX Composite Index closed up 37.57 points, or 0.19%, at 20,270.65. The materials sector rose 1.14% as gold stocks had a strong session, even though the price for bullion itself was little changed, as a firmer U.S. dollar offset support from bets that the Federal Reserve was unlikely to respond to the inflation data with immediate monetary tightening.
The cannabis sector enjoyed a robust rally in many of its names, as shares in OrganiGram surged 12.2% after the pot producer reported a jump in quarterly net revenue.
Ten of the 11 major S&P 500 sector indexes ended lower, with real estate, consumer discretionary and financials each down more than 1%.
JPMorgan Chase & Co stock fell 1.5% after the company reported blockbuster quarterly profit growth but warned that the sunny outlook would not make for blockbuster revenues in the short term due to low interest rates.
Goldman Sachs Group Inc dipped 1.2% after its quarterly earnings exceeded forecasts.
Citigroup, Wells Fargo & Co and Bank of America were due to report their quarterly results early on Wednesday.
PepsiCo Inc gained 2.3% after raising its full-year earnings forecast, betting on accelerating demand as COVID-19 restrictions continue to ease.
June-quarter earnings per share for S&P 500 companies are expected to rise 66%, according to Refinitiv data, with investors questioning how long Wall Street’s rally would last after a 16% rise in the benchmark index so far this year.
All eyes now turn to Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday for his comments about rising price pressures and monetary support going forward.
The Dow Jones Industrial Average fell 0.31% to end at 34,888.79 points, while the S&P 500 lost 0.35% to 4,369.21.
The Nasdaq Composite dropped 0.38% to 14,677.65.
Conagra Brands Inc dropped 5.4% after the packaged foods company warned that higher raw material and ingredient costs would take a bigger bite out of its profit this year than previously estimated.
Boeing Co fell 4.2% after the Federal Aviation Administration said late on Monday some undelivered 787 Dreamliners have a new manufacturing quality issue.
Declining issues outnumbered advancing ones on the NYSE by a 2.85-to-1 ratio; on Nasdaq, a 3.06-to-1 ratio favored decliners.
The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 61 new highs and 73 new lows.
Volume on U.S. exchanges was 9.5 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.
Oil prices gained almost 2% after the International Energy Agency said the market should expect tighter supply for now due to disagreements among major producers over how much additional crude to ship worldwide.
The market has been generally stronger as demand has rebounded and the Organization of the Petroleum Exporting Countries and their allies have held millions of barrels of supply from the market. OPEC+, as the group is known, was expected to boost supply, but discussions broke off without an agreement.
Brent crude rose $1.33, or 1.8%, to settle at $76.49 a barrel, while U.S. West Texas Intermediate crude rose $1.15, or 1.6%, to settle at $75.25 a barrel.
The Paris-based IEA said global storage drawdowns in the third quarter were set to be the biggest in at least a decade, citing early June stock draws from the United States, Europe and Japan.
“You’re still not going to have enough crude oil on the market to avoid a supply deficit by the end of the year. That was definitely a tailwind for the market,” said Bob Yawger, director of energy futures at Mizuho.
Oil prices will be volatile, IEA said, until differences are resolved among members of OPEC+. The group has been unwinding record output curbs agreed last year to cope with the pandemic. But a dispute over policy between Saudi Arabia and the United Arab Emirates put plans to pump more oil on hold.
Reuters, Globe staff