Wall Street Close: Bulls step back on reflation woes

US equity benchmarks post mild losses near record tops.
Strong US CPI, downbeat bond auction weigh on stocks ahead of Fed’s Powell.
JPM, Goldman fail to cheer upbeat results but Pepsi benefits from strong earnings.
Citigroup, Wells Fargo and BofA up for publishing results on Wednesday.

Anil Panchal FXStreet

US equity buyers ease controls on Tuesday after strong US inflation data and poor bond auction joined the coronavirus (COVID-19) woes to weigh on the market’s sentiment.

Read: Forex Today: Dollar strengthens on soaring inflation

US Consumer Price Index (CPI) rose past 4.9% expected to 5.4% YoY while the core reading was also upwardly revised from 3.8% to 4.5%, propelling the reflation woes. Additionally, surprisingly tepid demand for a 30-year bond auction also weighed on the market’s mood. As a result, the US 10-year Treasury yield rose 5.5 basis points (bps) to 1.418%, putting a safe-haven bid under the US dollar index (DXY) to jump the most in a month.

Other than the reflation fears and bond auctions, the coronavirus (COVID-19) also weighed on the investors’ mood. The recent jump in covid variants in the Northern Hemisphere probes the economic transition from the pandemic.

The traders’ rush to risk-safety triggered a pullback in equities. That said, Dow Jones Industrial Average (DJI) dropped 0.31% or 107.39 points to 34,888.79. Further, Nasdaq and S&P 500 both stepped back from record tops, losing 55.6 and 15.42 points, or 0.38% or 0.35% in that order, while closing around 14,677.70 and 4,370 respectively.

Stock-specific details suggest JP Morgan Chase and Goldman Sachs losing above 1.0% despite beating market consensus for Q2 revenues. On the contrary, Pepsi gained over 2.0% on upwardly revised full-year economic forecasts.

Moving on, global traders may keep watching the risk catalyst and place their eyes on Fed Chairman Jerome Powell’s testimony on the Semi-Annual Monetary Policy Report before the House Financial Services Committee.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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