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S&P 500 and Nasdaq slump after hitting record highs

By Arghyadeep on Jul 14, 2021 | 04:34 AM IST

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Major U.S. indexes S&P 500 and Nasdaq slumped on Tuesday after hitting record highs earlier in the session, after the Wall Street digested news which includes a rise in June’s consumer prices index and earnings from JPMorgan and Goldman Sachs that started off the quarterly earnings season.

The two indexes hit new record highs but dropped quickly into negative territory after an auction of 30-year Treasuries showed less demand than expected.

Data showed the U.S. consumer price index rose 5.4% in June, year-on-year, by the most since shortly before the financial crisis, while the so-called core consumer prices surged 4.5%, the most since November 1991.

“Any time you get an uptick in interest rates, the stock market is going to get nervous, especially on a day like today,” Joe Saluzzi, co-manager of trading at Themis Trading, told Reuters. “The CPI said one thing, and the bond auction said another.”

Most of the 11 major S&P 500 sector indexes were down, with the real estate and the financial sectors lose about 1% individually.

The S&P 500 banks index dropped 1.2% after JPMorgan Chase & Co reported 155% quarterly profit growth with a warning that this kind of bright outlook would not make for blockbuster revenues in the short term due to the low-interest rates.

Goldman Sachs Group Inc fell about 3.5% after its quarterly income beaten forecasts.

PepsiCo Inc gained about 3% after it raised its full-year earnings forecast, betting on accelerating demand as COVID-19 restrictions continue easing.

The S&P 500 companies’ earnings per share for the June quarter are expected to rise 66%, according to Refinitiv data, with investors doubting how long the rally would last after a near 17% rise in the benchmark index so far in 2021.

“With growth outperforming value, the takeaway is clearly that inflation from a market perspective is not a real threat in the long term,” Keith Buchanan, a portfolio manager at GLOBALT Investments, told Reuters.

On Tuesday, the Treasury Department said the budget deficit shrank to $2.2 trillion bolstered by economic recovery and increased tax revenue, while the spending for the first three quarters of the fiscal year increased by 6% to $5.3 trillion.

All the attention is now on 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 was down 0.4% at 34,876.89 points in afternoon trading, while the S&P 500 lost 0.56% to 4,367.86.

The Nasdaq Composite dropped 0.97% to 14,660.19.

Picture Credit: The Guardian

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