Wall Street slips to close as concerns mount ahead of CPI report

NEW YORK, July 12 (Reuters) – Wall Street ended in negative territory on Tuesday as growing signs of recession kept buyers away from the equity market ahead of inflation data.

While the three major U.S. stock indexes oscillated between modest gains and losses earlier in the session, they fell sharply late in the day ahead of Wednesday’s Labor Department consumer price report, with big bank earnings looming later in the week.

“(Investors are waiting) to know what’s going on with CPI and earnings,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company, in Milwaukee, Wisconsin. “For several months, we have oscillated between fears of inflation and fears of recession, almost daily.

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“We really confused the investors who chose to go on a buyers’ strike,” Schutte added. “I don’t hear a lot of people say ‘buy the dip’.”

While the CPI report is expected to show inflation accelerating in June, the so-called core CPI, which strips out volatility in food and energy prices, appears to offer further confirmation that inflation has peaked, which could potentially convince the Federal Reserve to ease on policy tightening in the fall.

Paul Kim, managing director of Simplify ETFs in New York, expects the year-over-year higher CPI “to be in the high eight or potentially even nine percent range, and with inflation as well. high, the Fed has only one thing on its mind.”

Fears that overly aggressive measures by the Fed to suppress high inflation for decades could push the economy to the brink of recession have been heightened by a reversal in 2-year and 10-year Treasury yields, seen as a harbinger of short-term and economic risk. contraction.

The market expects the central bank to raise the target federal funds rate by 75 basis points after its policy meeting in July, which would mark its third consecutive interest rate hike.

According to preliminary data, the S&P 500 (.SPX) lost 34.84 points, or 0.89%, to end at 3,819.59 points, while the Nasdaq Composite (.IXIC) lost 106.32 points, or 0.93%, to 11,266.28. The Dow Jones Industrial Average (.DJI) fell 178.50 points, or 0.57%, to 30,995.34.

The second quarter reporting season will be in full swing later in the week as JPMorgan Chase & Co, Morgan Stanley, Citigroup and Wells Fargo & Co release results.

On Friday, analysts saw S&P overall annual earnings growth of 5.7% for the April-June period, down from the 6.8% forecast at the start of the quarter, according to Refinitiv.

PepsiCo got the ball rolling this week by beating its quarterly earnings estimates and signaling it may raise prices amid resilient demand. Read more

Boeing Co shares jumped after the maker’s June aircraft deliveries hit the highest monthly level since March 2019. read more

This news, along with falling energy prices, helped the S&P 1500 Air Lines Index (.SPCOMAIR) gain altitude.

Clothing retailer Gap Inc (GPS.N) slipped after news of the departure of its CEO and the fact that margins would remain under pressure in the second quarter due to input costs. Read more

Software provider Service Now (NOW.N) plunged after its CEO’s remarks on macro headwinds and currency pressures. Other software companies Salesforce.com (CRM.N), Paycom Software (PAYC.N), Intuit (INTU.O) and Microsoft (MSFT.O) also fell.

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Reporting by Stephen Culp; additional reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru Editing by Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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