Stocks pull back from record levels after inflation data top estimates

U.S. stocks fell to reverse course after a record-setting session, with investors closely monitoring an early batch of corporate earnings results. Inflation was also back in focus and new data showed consumer prices surged by the most since 2008 in June.

Each of the S&P 500, Dow and Nasdaq traded lower after setting record closing highs a day earlier. The move lower came after a hotter-than-expected print on consumer price inflation Tuesday morning. The Labor Department’s headline consumer price index rose 0.9% in June over the prior month, unexpectedly accelerating from May’s 0.6% rise. Over last year, the CPI was up 5.4%, also exceeding the 4.9% increase expected and coming in at the fastest pace since 2008. And excluding more volatile food and energy prices, CPI was up 4.5% in June over last month, comprising the biggest jump since 1991 as prices bounced off last year’s pandemic-depressed lows.

Earnings out Tuesday morning, meanwhile, were mixed. PepsiCo (PEP) shares gained in early trading after the food and beverage giant delivered a strong earnings beat and raised its outlook for the full year. Meanwhile, JPMorgan Chase (JPM) posted mixed results that sent the stock lower, with weaker-than-expected fixed income sales and trading revenue and managed net interest income overshadowing a better-than-expected overall adjusted revenue and earnings per share. 

S&P 500 earnings in aggregate are expected to grow by 64% for the second quarter, which would mark the fastest increase since the fourth quarter of 2009, according to FactSet data. Bank earnings especially were expected to show strength, buoyed by a wave of reopenings during the April through June quarter and an equity market trading at all-time highs. 

The pace of growth for the second half of the year will be closely watched in company guidance, given the potential for a deceleration after an initial reopening surge. And with input costs rising and labor scarcities still weighing on the economy and pushing inflation higher, margins across industries will also be closely in focus. 

“If this idea happens and inflation rises, that’s actually a very good thing for your banks,” Courtney Dominguez Payne Capital Management senior wealth advisor, told Yahoo Finance. “So I think that can be a really good way of playing this going forward, where you want to look at companies that are going to benefit from either interest rates rising or who have just some pricing power here, that they are able to raise their costs effectively for their consumers and continue to make that money going forward.”

9:30 a.m. ET: Stocks pull back from record levels after hotter-than-expected inflation print

Here’s where markets were trading after the opening bell on Tuesday: 

  • S&P 500 (^GSPC): -6.87 (-0.16%) to 4,377.76

  • Dow (^DJI): -28.48 (-0.08%) to 34,967.70

  • Nasdaq (^IXIC): -20.01 (-0.14%) to 14,709.58

  • Crude (CL=F): +$0.09 (+0.12%) to $74.19 a barrel

  • Gold (GC=F): +$2.70 (+0.15%) to $1,808.60 per ounce

  • 10-year Treasury (^TNX): -0.4 bps to yield 1.358%

8:33 a.m. ET: Core consumer prices jumped by the most in three decades in June, beating estimates

The Labor Department’s June consumer price index (CPI) increased at a faster-than-expected rate both over last month and last year, with price increases getting exacerbated by persistent supply chain disruptions and labor scarcities during the pandemic. 

Headline consumer prices rose 0.9% in June over May, accelerating from May’s 0.6% monthly increase and coming in faster than the 0.5% monthly rise consensus economists were expecting, according to Bloomberg data. Over last year, CPI rose 5.4% versus the 4.9% increase anticipated, marking the biggest rise since 2008.

Much of the rise in CPI came as used car prices climbed further, with these. gaining 10.5% in June to account for more than one-third of the total rise. Indices tracking food and energy prices also gained by 0.8% and 1.5%, respectively. 

The core consumer price index, which excludes food and energy prices, rose 4.5% over last year in June, also beating estimates for a 4.0% increase. This marked the fastest rise since 1991.

7:42 a.m. ET: Goldman Sachs second-quarter results top expectations, fueled by investment banking, wealth management

Goldman Sachs (GS) posted results that mirrored those of peer big bank JPMorgan Chase, topping consensus estimates overall on the top and bottom lines, but missing expectations on closely watched trading results.

The bank’s net revenue of $15.39 billion grew 16% over last year and beat estimates for $12.43 billion, according to Bloomberg consensus data. Earnings per share of $15.02 were also well above the $10.15 expected. Net interest income, derived from the bank’s core lending business, grew 73% over last year to $1.63 billion.

Beneath the headline results, however, some business areas performed less strongly. Trading revenue overall was down 32% to $4.9 billion, missing estimates for $5.02 billion. Fixed income trade revenues led the drop, with these plummeting 45% over last year to $2.32 billion. Equity sales and trading revenue also fell over last year by 12% to $2.58 billion, though this topped estimates. Investment banking revenue was a strong spot amid a busy IPO period earlier this year, growing 26% to $3.45 billion. And consumer and wealth management sales were $1.75 billion in the second quarter for a rise of 28% over last year.

“Our second quarter performance and record revenues for the first half of the year demonstrate the strength of our client franchise and our continued progress on our strategic priorities,” CEO David Solomon said in a statement. “While the economic recovery is underway, our clients and communities still face challenges in overcoming the pandemic. But, as always, I am proud of the dedication and resilience of our people, who have worked tirelessly to help our clients navigate the ever-changing market environment.”

7:20 a.m. ET Tuesday: JPMorgan Chase posts mixed second-quarter results 

JPMorgan Chase kicked off big bank earnings on a mixed note Tuesday morning, posting overall quarterly sales and profits that topped estimates while key business segments came in slightly short of consensus expectations. Still, CEO Jamie Dimon struck an upbeat tone on the health of consumer spending in the recovering economy, noting, “Consumer and wholesale balance sheets remain exceptionally strong as the economic outlook continues to improve.”

The largest U.S. bank by assets posted earnings per share of $3.78, topping estimates for $3.15, according to Bloomberg consensus data. Likewise, adjusted revenue of $31.4 billion was better than the $30.06 billion anticipated. 

The company’s lucrative fixed income sales and trading revenue fell 44% over last year to $4.10 billion, or just a tick below the $4.12 billion anticipated. Equity sales and trading revenue still grew 13% over last year to an estimates-topping $2.69 billion, however, with a market rally to all-time highs during the quarter helping boost results. And in terms of bottom-line results, managed net interest income of $12.85 billion was also down 8% and missed estimates.

6:05 p.m. ET Monday: Stock futures hover near all-time highs 

Here’s where markets were trading Monday evening:

  • S&P 500 futures (ES=F): 4,376.50, unchanged 

  • Dow futures (YM=F): 34,887.00, +12 points (+0.03%)

  • Nasdaq futures (NQ=F): 14,877.5, +8.25 points (+0.06%)

Trader Peter Tuchman, left, and Benjamin Tuchman, father and son, work on the floor of the New York Stock Exchange, Monday, July 12, 2021. Stocks are wobbling between small gains and losses in the early going on Wall Street Monday as investors look ahead to a wave of earnings reports from big U.S. companies coming out this week. (AP Photo/Richard Drew)

Trader Peter Tuchman, left, and Benjamin Tuchman, father and son, work on the floor of the New York Stock Exchange, Monday, July 12, 2021. Stocks are wobbling between small gains and losses in the early going on Wall Street Monday as investors look ahead to a wave of earnings reports from big U.S. companies coming out this week. (AP Photo/Richard Drew)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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