U.S. stocks close mixed as fears of waning economy continue to weigh on investors
U.S. stocks closed mixed on Wall Street Thursday, regaining early losses after banks reported lower earnings, dragging down the markets.
The S&P 500 fell 11 points, or 0.3%, to close at 3,790. The Dow Jones Industrial Average lost 0.5% and the tech-heavy Nasdaq edged slightly up .03%. Banks were among the biggest weights on major indexes following weak earnings and a warning from JPMorgan Chase.
U.S. stocks sank after higher U.S. inflation stoked expectations of more rate hikes that investors worry will chill economic growth. Investors worry aggressive action by the Fed and other central banks to cool inflation that is at four-decade highs might derail global growth.
"Growth fears are hitting the markets harder than inflation concerns," Stephen Innes of SPI Asset Management said in a report.
- Inflation hit 9.1% in June, highest rate in more than 40 years
- As inflation spikes, Social Security cost-of-living bump could reach 10.5%, report says
- Rise in interest rates expected to slow down home sales: "The housing market is in a downturn right now"
On Wednesday, the S&P 500 lost 0.4%. The Dow fell 0.7% and the Nasdaq composite dropped 0.2%.
Traders expect another Fed rate hike this month, probably matching last month's 0.75 percentage point rise, the biggest in 28 years and three times the usual margin.
Bank stocks have been hit hard this year as investors have worried about the Federal Reserve putting the U.S. economy into recession to combat inflation. A recession would mean some Americans would lose jobs, and likely start falling behind on their loans. These fears have more than offset the higher revenues that banks have earned from higher interest rates.
Weak earnings reports also pulled down bank stocks. Profits at JPMorgan Chase fell by 28% in the second quarter, the bank reported Thursday, as it tries to navigate an economy that's showing strength in many areas but losing steam among rising interest rates that hit consumers and businesses alike. Inflation at the wholesale level climbed 11.3% in June compared with a year earlier. It follows a worrisome report on Wednesday showing prices at the consumer level remain high.
Fed officials say a recession is possible but not certain. They point to a strong U.S. job market despite higher borrowing costs.
Taking a more critical stance, JPMorgan Chase CEO Jamie Dimon warned in a statement that while the U.S. economy is growing and the job market and consumer spending are solid, a number of factors "are very likely to have negative consequences on the global economy sometime down the road," including shrinking consumer confidence and the Federal Reserve's efforts to bring decades-high inflation under control.
"The U.S. consumer is almost single-handedly keeping the global economy afloat," said Andrew Hunter, senior U.S. economist at Capital Economics, in a research note in June. Recent consumer spending data suggests consumers have started cutting back their spending on goods and services. Experts said it could be one of the first signs that inflation might be too high.
Traders are looking ahead to the latest quarterly results from big U.S. companies in the next few weeks.
In energy markets, benchmark U.S. crude lost $1.26 to $95.04 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 46 cents to $96.30 on Wednesday. Brent crude, the price basis for international oil trading, retreated $1.06 to $98.51 per barrel in London. It added 8 cents the previous session to $99.57 a barrel.