The S&P 500 (.SPX) pared early losses to close modestly lower, after investors digested disappointing quarterly results from two large U.S. Banks and hotter-than-expected inflation data.
Initially, all three major U.S. stock indexes sold off sharply in the wake of second-quarter earnings from JPMorgan Chase & Co and Morgan Stanley (MS.N). Both reported slumping profits and warned of impending economic slowdown. Losses narrowed as the session wore on, with advancing microchip stocks (.SOX) helping nudge the Nasdaq Composite Index to a nominal gain.
JPMorgan CEO Jamie Dimon struck a cautious note on the global economy while Morgan Stanley’s investment banking unit struggled to cope with a slump in global dealmaking.
Shares of JPMorgan Chase and Morgan Stanley fell 3.5% and 0.4%, respectively, while the S&P Banks index (.SPXBK) shed 2.4%.
Core inflation, which strips out food and energy prices, continues to ease from the March peak, although it remains well above the central bank’s average annual 2% target.
The Dow Jones Industrial Average (.DJI) fell 142.62 points, or 0.46%, to 30,630.17, the S&P 500 (.SPX) lost 11.4 points, or 0.30%, at 3,790.38 and the Nasdaq Composite (.IXIC) added 3.60 points, or 0.03%, at 11,251.19.
With earnings season officially underway, analysts expect aggregate S&P 500 second-quarter year-on-year profit growth of 5.1%, far less than the 6.8% estimate at the beginning of the quarter, according to Refinitiv.
U.S.-listed shares of Taiwan Semiconductor Manufacturing rose 2.9% following the chipmaker’s upbeat revenue guidance.
Conagra Brands (CAG.N) tumbled 7.2% after issuing an annual earnings forecast that came in below estimates.
Declining issues outnumbered advancers on the NYSE by a 3.11-to-1 ratio; on Nasdaq, a 2.12-to-1 ratio favored decliners.