THE GIST (“THE WHAT”)
The S&P 500 index rallied at the open following strong second quarter earnings releases by big banks. The rally faded mid-session as investors digested an unexpected jump in the University of Michigan’s U.S. July inflation expectations indicator and hawkish comments by Fed officials. Erasing early session gains, the index closed slightly lower at 4505.41, down 4.64 points (-0.1%).
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THE DETAILS (The “How & Why”):
Better-than-expected earnings reported by JPMorgan Chase, Wells Fargo, and Citigroup lifted investor sentiment at the open. The index registered a 15-month high of 4527.76. The gains, however, faded following the release of University of Michigan’s U.S. July consumer sentiment index that rose unexpectedly to 3.4% as against the expectation of a decline to 3.1%. Hawkish comments by Fed officials late Thursday also dampened sentiment. The 10-year Treasury yield rose 5.4 basis point to close at 3.817%.
While bank stocks traded mostly higher after JPMorgan Chase beat analysts’ estimates on the back of higher rates and better-than-expected bond trading, regional banks tumbled amid expectations that net interest income for these banks could be substantially below estimates as they face competition for deposits. Leading the losers within the broader index, State Street Corp tumbled 12.05% on reporting a sharp 10% drop in its net income. Bank of New York Mellon Corp and Northern Trust Corp were the other major decliners of the session, down more than 6% each.
Warner Bros Discovery shed 5.34% amid concerns that the actors and writers strike could halt the production of new TV shows and movies. Oil prices fell more than 2% hurting energy stocks. APA Corp closed 5.08% lower. Devon Energy and Marathon Oil fell more than 4% each.
On the bullish side, healthcare stocks rallied after the bellwether UnitedHealth Group reported strong second quarter revenues, spiking 7.24% and leading the gains within the index. Elevance Health, Cigna Group, and Molina Healthcare all were sharply higher for the day. Homebuilders also extended their previous session gains following Raymond James upgraded several stocks within the sector.