By Medha Singh and Devik Jain
(Reuters) – The S&P 500 and Dow indexes edged higher in volatile trading on Tuesday as investors digested a mixed bag of quarterly earnings reports from U.S. lenders but technology stocks fell on worries over new business restrictions in California.
Largest U.S. lender JPMorgan Chase & Co was up 0.2% after it posted a smaller-than-expected 51% drop in second-quarter profit.
However, Wells Fargo & Co tumbled 5.7% after booking a quarterly loss for the first time since the 2008 financial crisis. Citigroup Inc was also down 2.7% as it reported a steep fall in quarterly profit.
The S&P 500 banks index slipped 1.3% as the banks set aside a combined $28 billion to cover potential losses on loans to borrowers hurt by the coronavirus pandemic.
“We’re clearly in for more volatility as earnings season is now beginning, and these increases in the virus in California, Texas, Tennessee and Florida are going to continue to keep people on edge,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab in Austin, Texas.
Wall Street has reclaimed most of its coronavirus-driven losses since March as a raft of monetary and fiscal stimulus and upbeat economic data raised hopes of a swift post-pandemic recovery.
But a recent record surge in COVID-19 cases and new business restrictions, particularly in California, have sparked a selloff in tech stocks, with the Nasdaq pulling back about 6% from its intraday record high on Monday.
Technology, consumer discretionary and communication services indexes slipped on Tuesday. They have performed strongly this year driven by solid gains in their respective components – Apple Inc, Amazon.com and Facebook Inc.
“A lot of these companies have acquired historically high valuations and if you become more anxious about the market direction in general, those would be the first few you tend to sell if you are looking to protect your profits,” said Keith Buchanan, senior portfolio manager at Globalt in Atlanta.
At 11:27 a.m. ET, the Dow Jones Industrial Average was up 232.92 points, or 0.89%, at 26,318.72, the S&P 500 was up 7.16 points, or 0.23%, at 3,162.38. The Nasdaq Composite was down 43.84 points, or 0.42%, at 10,347.00.
Investors are bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the 2008 financial crisis, according to Refinitiv IBES data.
Wall Street’s fear gauge rose for a second straight day to its highest in two weeks.
Delta Air Lines Inc fell 4.1% as it warned it will be more than two years before the industry sees a sustainable recovery from the “staggering” impact of the coronavirus pandemic, with demand largely tracking the curve of infections in different places.
Data on Tuesday showed U.S. consumer prices rebounded in June after three straight monthly declines, but the underlying trend suggested inflation would remain muted.
Advancing issues outnumbered decliners by a 1.37-to-1 ratio on the NYSE and by a 1.01-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and no new low, while the Nasdaq recorded 20 new highs and 25 new lows.
(Reporting by Medha Singh and Devik Jain in Bengaluru; Editing by Shounak Dasgupta and Anil D’Silva)
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