US equities give up early gains, turn mixed
Investors looking closely at the latest round of earnings
NEW YORK, July 14, (AP): Stocks gave up an early gain and turned mixed on Wall Street as banks and energy companies fell while other sectors rose.
Investors were keeping a close eye on a new batch of earnings news from banks, airlines and other companies as well as the latest report showing another rise in inflation.
Investors are looking closely at the latest round of earnings for confirmation about the scale and pace of the economic recovery as people return to work, travel again and generally try to get back to some semblance of normal following the worst of the virus pandemic.
The S&P 500 was little changed as of noon Eastern. The Dow Jones Industrial Average fell 45 points, or 0.1%, to 34,842 and the Nasdaq fell 0.2%. Small-company stocks continued to lag the rest of the market. The Russell 2000 index fell 1.3%.
Energy companies had some of the biggest losses, partly due to a drop of 2.4% in the price of benchmark U.S. crude oil. Cabot Oil & Gas fell 3.4%.
Technology stocks were higher, led by a 1.8% gain in Apple following a published report that the consumer electronics giant planned to increase production of iPhones.
Long-term bond yields were mostly lower. The yield on the 10-year Treasury note fell to 1.35% from 1.41% late Tuesday.
Banks were broadly lower even after several of them turned in solid earnings reports.
Citigroup gave up an early gain and fell 0.7%, despite reporting a more than five-fold rise in profits, helped by an improving economy that resulted in fewer bad loans on the bank’s balance sheet. Wells Fargo also gave up an early gain and fell 1.3% as investors brushed off a report of its most profitable quarter in two years.
Mixed results from Bank of America disappointed investors. It fell 3% after reporting solid profits, but weak revenue.
Airlines showed more signs of recovery as people begin to resume travel for work and leisure. American Airlines jumped 2.9% after giving investors an encouraging update on its second-quarter financial picture.
Outside of earnings, investors are still closely watching measures of inflation to better gauge how it could impact the recovery. Inflation at the wholesale level jumped 1% in June, pushing price gains over the past 12 months up by a record 7.3%. The news on wholesale prices followed a report Tuesday that consumer prices increased in June by 0.9% and were up 5.4% over the past 12 months, the biggest 12-month gain in 13 years.
Federal Reserve Chair Jerome Powell suggested that inflation will likely remain elevated, but eventually moderate, reinforcing the central bank’s position that rising inflation is a temporary impact from the recovering economy. A key concern for investors has been how quickly the Fed will shift its interest rate policies in the face of rising inflation, but it has signaled there is no imminent change coming.
France’s CAC 40 edged down 0.2% to 6,544.96 in early trading, while Germany’s DAX shed nearly 0.2% to 15,765.96. Britain’s FTSE 100 slipped 0.4% to 7,094.19. The future for the Dow industrials slipped 0.2% to 34,729.00. The S&P 500 future edged 0.1% lower to 4,357.30.
Japan’s benchmark Nikkei 225 lost 0.4% to 28,608.49. Australia’s S&P/ ASX 200 added 0.3% to 7,354.70. South Korea’s Kospi slipped 0.2% to 3,264.81. Hong Kong’s Hang Seng dropped 0.6% to 27,787.46, while the Shanghai Composite dipped 1.1% to 3,528.80.
“This backdrop of higher for longer U.S. inflation and a faster hiking Fed and strengthening USD is not a good recipe for emerging Asia,” said Robert Carnell, regional head of research Asia-Pacific at ING, referring to the U.S. currency.
Surging coronavirus cases in Indonesia, Malaysia and Thailand are another concern, he said. South Korea also is seeing cases jump. It released data showing an improvement in the jobless rate, but the numbers were collected before pandemic restrictions were tightened.
Some parts of Japan are also seeing an uptick in COVID-19 infections, fanning fears about the tens of thousands of athletes, dignitaries and other people from some 200 nations entering the country for the Tokyo Olympics. Tokyo has seen hundreds of new cases daily recently, with 1,149 cases reported Wednesday.
Some experts say that could jump to thousands in coming weeks, as the “bubble” conditions for the Olympians have been compromised, with staff and athletes testing positive for the virus. The Games open on July 23.
Investors got another snapshot of how inflation continues to show up in the economy as the a rapid spike in consumer demand and supply constraints translate into higher prices for consumer goods.
The latest report from the U.S. Labor Department showed yet another increase in consumer prices in June that surprised economists. Prices jumped by the most in 13 years, extending a run of higher inflation that has been raising concerns on Wall Street that the Fed might consider withdrawing its low-interest rate policies and scaling back its bond purchases earlier than expected.
Much of the increase in prices for goods, such as used cars, is mostly tied to a surge in demand and lack of supply. Prices for many items, like lumber and other raw materials, are easing or will ease as suppliers ramp up operations, said Jamie Cox, managing partner at Harris Financial Group.