US stocks slump as investors digest inflation data showing prices surged in June

Stock trader worried

US stocks fell Tuesday after inflation data showed prices rose more than expected in June.

The Consumer Price Index increased 0.9% in June, far higher than Bloomberg’s consensus estimate among economists of 0.5%. The reading marked the largest one-month change since June 2008.

On a year-over-year basis, prices increased 5.4%, higher than economists’ expectations for a 4.9% year-over-year increase. However, June 2020 was the lowest point for Core CPI during the pandemic shutdown, so year-over-year increases are expected.

Here’s where US indexes stood at the 4 p.m. ET close on Tuesday:

Mike Lowengart, E*Trade Financial managing director of investment strategy, said that the real question on investors’ minds after the CPI read is how long hot inflation numbers will last.

“Transitory has been the buzzword when it comes to inflation but it’s a tricky phrase. Does it mean a few months, a year, or even longer? Every successive high inflation read will make it harder and harder for the Fed to remain accommodative. And on the markets front, we may experience a bit of a tug of war as traders balance the economic data with strong bank earnings beginning to roll in,” he said.

Elsewhere in markets, Amazon, Apple, Alphabet, and Microsoft all hit record intraday highs today. The stalwarts are helping propel the S&P 500 to new all-time highs.

The benchmark index has notched 39 record closing highs through Monday’s session, according to Bespoke Investment Group. If it keeps up its current pace, it could close out 2021 with 74 record closing highs, the second-most of all time, Bespoke said.

The yield on the US 10-year Treasury gained 4.7 basis points to 1.41%.

Bank earnings began this morning, with JPMorgan and Goldman Sachs beating expectations.

West Texas Intermediate crude gained 1.58% to $75.27 per barrel. Brent crude, oil’s international benchmark, climbed 1.77%, to $76.49 per barrel.

Gold was flat at $1,807.2 per ounce.

Read the original article on Business Insider

All major US stock indexes close at record highs ahead of a flood of corporate earnings

Traders work on the floor of the New York Stock Exchange (NYSE)
  • Wall Street’s key stock indexes ended at record highs on Monday.
  • Stocks advanced ahead of the second-quarter earnings season which starts on Tuesday.
  • Disney and Goldman Sachs shares were winners on the Dow Jones Industrial Average.
  • See more stories on Insider’s business page.

US stocks finished at record highs on Monday, before the start of a new round of earnings reports that should show profit growth for Corporate America.

All three of Wall Street’s benchmark indexes notched new closing highs, with the Dow industrials and the S&P 500 overcoming losses earlier in the day. Among the Dow’s winners, Disney rose after saying its Disney Plus streaming service pulled in $60 million from this weekend’s release of Marvel Studios’ “Black Widow” movie.

Here’s where US indexes stood at 4:30 p.m. on Monday:

Goldman Sachs and JP Morgan Chase advanced ahead of the release of their financial results early Tuesday in what’s considered the kickoff to the second-quarter earnings season. S&P 500 companies are expected, on average, profit growth of 64%, led by the energy and industrial sectors, according to FactSet.

“With expectations high (again), it won’t be easy for companies to handily clear the bar like they did the past several quarters. We also recognize that stock valuations are elevated, so disappointments will likely be punished. Stocks need strong earnings to come through to justify those valuations, and we think we’ll get them,” said strategists at LPL Financial in a Monday note.

Around the markets, Virgin Galactic shares turned sharply lower after the company said it could sell up to $500 million worth of stock following a successful space test flight with founder Richard Branson on board.

Markets veteran Mohamed El-Erian said stocks are vulnerable to falls despite the recent drop in bond yields and could be rocked when the US Federal Reserve starts to unwind its support.

Gold rose 0.9% to $1,805.68 per ounce. Long-dated US Treasury yields rose, with the 10-year yield at 1.363%.

Oil prices were mixed. West Texas Intermediate crude declined 0.6%, to $74.12. Brent crude, oil’s international benchmark, picked up 0.1%, to $75.23 per barrel .

Bitcoin dropped 3.9%, to $32,910.95.

Read the original article on Business Insider

Don’t expect the stock market to rally on the back of blowout corporate earnings, Bank of America says

A man sits on the Wall street bull near the New York Stock Exchange
Wall Street is looking for higher earnings from S&P 500 companies in the second quarter.

  • Wall Street is expecting more earnings beats to come from S&P 500 companies this earnings season.
  • But a jump in earnings doesn’t always result in a lock on hefty market returns, BofA analysts wrote.
  • 60% of losing quarters since 1996 have taken place in quarters with earnings beats, the firm said.
  • See more stories on Insider’s business page.

Earnings beats in the second quarter look set to climb after the strongest quarter on record but such figures provide no guarantee that US equities will follow suit in running higher, according to Bank of America.

A fresh batch of corporate financial results is set to start rolling in on Tuesday, led by investment banks Goldman Sachs and JP Morgan Chase, followed by Citigroup and Morgan Stanley on Thursday. The reports arrive at a time of record highs for the S&P 500, whose return of 16% so far this year ​​has been “entirely driven” by rising earnings estimates of 21%, BofA said in a research note Monday.

Consensus estimates for per-share earnings for the second quarter have climbed by 7% to $45.01, the firm said, marking the biggest upward revision since regulatory rules governing information disclosures by companies went into effect in late 2000. The rosier outlook follows a record 23% beat in earnings in the first quarter of this year.

Quarterly earnings surprises and market returns have been correlated by 32% since 1996. However, “strong earnings don’t always translate to strong market returns,” wrote BofA equity strategists led by Savita Subramanian.

60% of down quarters since 1996 – or 75% of down quarters excluding the global financial crisis – have occurred in quarters with earnings beats, they said. “In 2000, despite earnings beating consensus for 10 straight quarters, the S&P 500 declined for four consecutive quarters,” said Subramanian.

BofA sees second-quarter per-share earnings beating by 11%, or $50, which would translate into growth of at least 79% year-over-year. It said early reporters and macro indicators suggest a beat of 3% to 20%.

“Continued earnings momentum should refuel investors’ confidence in the recovery amid slowdown concerns and drive a rotation back into Value,” the analysts said.

All 11 of the S&P 500’s sectors are expected to turn in higher earnings, led by the energy and industrials groups, according to FactSet.

BofA’s earnings report is scheduled to be released on Wednesday.

Read the original article on Business Insider