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S&P 500: S&P 500, Dow close lower after bank earnings, inflation data

The S&P 500 index pared early losses to close modestly lower on Thursday after investors assessed disappointing quarterly results from two major US banks and data. inflation hotter than expected.

Initially, all three major US stock indexes sold off sharply after second-quarter earnings from JPMorgan Chase & Co and Morgan Stanley. Both reported falling profits and warned of an impending recession.

Losses narrow as trading continues, with gains in chip stocks helping to boost Nasdaq The composite index increased nominally.

“There is an unreasonable reaction to JP Morgan and Morgan Stanley results,” said Jay Hatfield, managing director and portfolio manager at InfraCap in New York. No wonder investment banking is weak. ”

“JPMorgan warns that there is uncertainty in the market, but if you live and breathe, you know that the market has uncertainty.”

JPMorgan CEO Jamie Dimon issued a cautious note on the global economy while Morgan Stanley’s investment banking unit struggled to cope with a drop in global trading activity.

Shares of JPMorgan Chase and Morgan Stanley fell 3.5% and 0.4%, respectively, while the S&P Banks index fell 2.4%.

Recession worries were exacerbated as the Labor Department’s Producer Price Index report echoed Wednesday’s Consumer Price Index data, showing inflation hotter than expected in June. .

The sell-off started to ease after raised Governor Christopher Waller said he favors another 75 basis point rate hike in July, which eases anxiety over an even larger 100 basis point increase.

“The Fed will raise rates to 75 but they shouldn’t,” Hatfield said. “The Fed has done a lot to reduce inflation but they won’t realize it until they see it in the rearview mirror.”

“The thing to remember about the Fed is that it’s almost as if their third mandate is to stay behind the curve,” Hatfield added.

On Wednesday, the possibility of larger gains rose following the CPI report, which examines the central bank’s intention to tackle decades-high inflation – a prospect that increases the chances of a recession.

“There will be a recession but a mild recession,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “The key ingredient is continued strength in the labor market. Given our position in the jobs picture, that’s not an immediate threat.”

Core inflation, including food and energy prices, continues to ease from its March peak, although it remains well above the central bank’s 2% average annual target:

The Dow Jones Industrial Average fell 142.62 points, or 0.46%, to 30,630.17, the S&P 500 lost 11.4 points, or 0.30%, to 3,790.38 and the Nasdaq Composite added 3. 60 points, or 0.03%, at 11,251.19.

Eight of the 11 major S&P 500 sectors ended the day in the negative, with financials suffering the biggest percentage loss, down 1.9%.

Technology is the biggest gainer.

As earnings season kicks in, analysts expect S&P 500 year-over-year earnings growth of 5.1%, according to Refinitiv, much lower than the 6.8% estimate at the beginning of the year, according to Refinitiv. precious.

US-listed shares of Taiwan Semiconductor Manufacturing rose 2.9% on the chipmaker’s upbeat revenue guidance.

Conagra Brands fell 7.2% after issuing a lower-than-estimate annual earnings forecast.

The number of losers outnumbered advancers on the NYSE by a ratio of 3.11 to 1; on Nasdaq, 2.12-1 favors the bears.

The S&P 500 posted a 52-week high and 44 new lows; Nasdaq Composite recorded 9 new highs and 294 new lows.

Volume on US exchanges was 10.86 billion shares, compared with an average of 12.48 billion over the last 20 trading days.

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