Equities exhibited minimal movement on Wednesday as market participants assessed earnings announcements from major banking institutions and processed the most recent wholesale inflation data.
The S&P 500 experienced a decline of 0.1%. The Nasdaq Composite dipped approximately 0.1%, following the tech-heavy index achieving a new record in the prior session. The Dow Jones Industrial Average increased by 5 points, representing a marginal rise of less than 0.1%.
Big bank earnings releases persisted for a second day, as Bank of America, Goldman Sachs, and Morgan Stanley all reported earnings that exceeded expectations. Despite the strong results, shares experienced a decline. Goldman shares experienced a decline of 0.5%, whereas Morgan Stanley saw a more significant drop of over 2%. Bank of America shares experienced a decline of approximately 1% following a shortfall in net interest income relative to market expectations. These results follow the announcement from JPMorgan Chase, Wells Fargo, and Citigroup, each of which reported quarterly figures exceeding analysts’ expectations for both earnings and revenue. Robust second-quarter performance from Johnson & Johnson propelled shares upward by over 5.5%.
On Wednesday, equities experienced an initial uplift following the release of new inflation data. June’s producer price index, regarded as a leading indicator for pipeline inflation pressures, indicated no variation in wholesale prices for the month. Economists surveyed by Dow Jones anticipated a 0.2% rise in the Producer Price Index (PPI). “Today’s PPI headline suggested moderating inflation but is not as promising when you look under the surface,” stated Marc Balcer, director of investment strategy at Girard. It is crucial to recognize that PPI excludes the direct effects of tariffs, indicating that the $27 billion in tariff revenue collected in June will need to be absorbed by foreign manufacturers, domestic corporations, or, ultimately, the consumer. Therefore, it was not unexpected to observe an initial stock rally lose momentum.
Wednesday’s report comes on the heels of data indicating a rise in consumer prices in June compared to the preceding month. Ongoing inflation has raised apprehensions regarding the effects of President Donald Trump’s tariffs on the economy. On Tuesday, the Nasdaq exhibited superior performance, bolstered by an increase in Nvidia shares, ultimately closing at a new record high. The S&P 500 reached a historic peak during the prior session.
Over the weekend, Trump escalated his trade conflict by declaring a 30% tariff on imports from Mexico and the European Union, set to take effect on August 1. On Tuesday, Trump declared that a trade agreement had been established with Jakarta, featuring a 19% tariff on the Asian nation’s exports to the United States. “We continue to believe that the Fed is going to be patient with any potential rate cuts, as inflation is still above forecast and the labor market remains strong,” stated Larry Tentarelli, chief technical strategist for the Blue Chip Daily Trend Report. He noted that, to be certain, “any potential breakout in inflation is a near-term risk to equity markets.”