The Goldman Sachs booth on the floor of the New York Stock Exchange
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Stock futures fell Tuesday morning after an unexpectedly hot inflation report overshadowed a strong start to the second-quarter earnings season.
The Dow Jones Industrial Average futures fell 86 points, or 0.3%. The measure closed a day ago with a record of just under 35,000. S&P 500 futures lost 0.4%. Nasdaq 100 futures lost 0.3%.
Inflation rose the fastest in nearly 13 years, the Labor Department reported Tuesday. The consumer price index rose by 5.4% compared to the previous year; Economists polled by Dow Jones expected an increase of 5%. Core CPI excluding food and energy rose 4.5%, the largest increase for the metric since September 1991 and well above the estimate of 3.8%.
The 10-year US Treasury yield rose slightly after the CPI report.
The latest inflation data came after big banks and PepsiCo released offbeat earnings reports in the second quarter that beat Wall Street estimates. But with stocks at record highs and the Dow Jones Industrial Average close to 35,000, expectations have likely been higher than official estimates suggested.
JPMorgan Chase’s shares fell less than 1% in early trading, even after posting earnings of $ 11.9 billion, or $ 3.78 per share, up the estimate of 3.21 in the second quarter US dollar of the analysts surveyed by Refinitiv exceeded.
Banks reserved billions of dollars for loan losses during the pandemic, but released those reserves as consumers did better than expected. JPMorgan released $ 3 billion in credit risk reserves after only making $ 734 million in withdrawals. That put the company in $ 2.3 billion in profits, which allowed the bank to beat profit expectations. With this dissolution of loan loss reserves, investors can give less credit to JPMorgan’s bottom line.
Meanwhile, Goldman Sachs’ stock climbed about 1% pre-trading. The company reported earnings of $ 15.02 per share for the second quarter, beating analysts’ expectations of $ 10.24 per share. The bank had its second-best quarterly investment banking earnings when a rush of IPOs hit Wall Street last quarter.
PepsiCo also put down estimates for its earnings and revenue for the second quarter, fueled by returning restaurant demand. The beverage and snack giant has also raised its forecast. The shares gained more than 1% in pre-market trading.
According to FactSet, total earnings reports for the second quarter are expected in the coming weeks with earnings growth of 64% year over year for the quarter. That would be the biggest quarterly profit increase since 2009.
According to analysts polled by FactSet, bank earnings are expected to more than double in the second quarter with an estimated growth rate of 119.5% year over year.
In Monday’s regular trading session, the Dow rose 126.02 points to close just below 35,000. The blue chip measure has increased by 14% this year. The S&P 500 and Nasdaq Composite gained 0.3% and 0.2%, respectively, to close.
“High earnings expectations and any company’s forward guidance will drive markets higher or disappointment can lead to a small pullback in the equity markets,” said Jeff Kilburg, chief investment officer, Sanctuary Wealth. “Eyes will be on the big banks to set the tone for the next profitable weeks.”
Bank of America, Citigroup, Wells Fargo and Morgan Stanley also finished higher on Monday. They’ll report their earnings later in the week.
Federal Reserve Chairman Jerome Powell is due to appear before Congress Wednesday and Thursday for an update on monetary policy. He has claimed that the Fed’s loose policy will remain intact until further progress is made on its employment and inflation targets.
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