Wall Street stocks closed in the red on Thursday after another gloomy inflation report and disappointing bank results. which amounted to a gloomy start to the second-quarter corporate earnings season.
Initially, the three major US stock indices fell hard after the results of the second quarter of JPMorgan Chase Y Morgan Stanley. Both banks reported lower earnings and warned of an impending economic slowdown. Losses narrowed as the session progressed.
The S&P 500 fell 0.3% and the dow jones lost 0.5%. The nasdaq it ended with few changes. JPMorgan Chase reported a sharp drop in profit in its latest quarter, falling short of forecasts. His CEO, Jamie Dimondreaffirmed his pessimistic view of the economy.
While, wholesale inflation rose 11.3% in June compared to the previous year. This follows a worrying report on Wednesday showing consumer prices remain high.
Meanwhile, the results of JPMorgan Chase were lower than estimates as the banking giant reported a 28 percent drop in quarterly profit and set aside additional funds in case of bad loans.
JPMorgan executives emphasized that US consumers would hold up relatively well if there is a recession, but they warned of economic headwinds that will “very likely” affect growth.
The JPMorgan shares fell 4.4 percent. Morgan Stanley, which missed estimates, fell 2.6 percent.
“There was an irrational response to the results from JPMorgan and Morgan Stanley,” said Jay Hatfield, chief executive officer and portfolio manager at InfraCap. “It was not a surprise that investment banking was weak.”
Weak banking results underscore “that we are now entering the process of the very real possibility of an earnings downturn”said Adam Sarhan of 50 Park Investments, referring to the possibility of two consecutive quarters of lower earnings compared to the same period a year ago.
“That could lead to lower (share) prices.Sarhan said. “Because first it slowed down on Main Street, and then you see earnings slow down on Wall Street.”
However, the governor of the Federal Reserve, Christopher Wallersaid that if US economic data comes in stronger than expectedwould support an even larger interest rate hike than last month’s three-quarter increase to combat skyrocketing inflation.
A full point increase in the benchmark interest rate It would be the largest since at least 1990.
Waller also said that while fears of a recession have increased, he believes the strong US job market means the economy can avoid a recession.
At the same time, the main US oil contract, West Texas Intermediate, fell five percent on growing fears of a global recession, traders said.
(With information from AFP)