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Stock Market News for Jul 15, 2022

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U.S. stocks ended lower on Thursday, but well off their session lows, as investors digested disappointing quarterly results from two big banks and assessed the size of the next rate hike to be made by the Fed later this month. Both Dow and the S&P 500 ended in negative territory, while the Nasdaq somehow managed to close in the green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.5% or 142.62 points to close at 30,630.17 points, after declining as much as 628 points during one point of the trading session.

The S&P 500 declined 0.3% or 11.40 points to end at 3,790.38 points, recording its fifth straight daily loss. Financial stocks were the worst performers. Energy and material sector stocks with also big losers on Thursday.

The Financials Select Sector SPDR (XLF) and the Energy Select Sector SPDR (XLE) each lost 1.9%.  The Materials Select Sector SPDR (XLB) declined 1.8%. Eight of the 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq gained less than 0.1% or 3.60 points to finish at 11,251.19 points. The index at one point was trading down more than 2%.

The fear-gauge CBOE Volatility Index (VIX) was down 1.57% to 26.40. Decliners outnumbered advancers on the NYSE by a 3.11-to-1 ratio. On Nasdaq, a 2.12-to-1 ratio favored declining issues. A total of 10.86 billion shares were traded on Thursday, lower than the last 20-session average of 12.48 billion.

Rate Hike Worries Grip Markets

Rate hike worries continued to make investors jittery on Thursday. Investors are trying to assess how much the interest rate the Fed would hike in its next meeting which is less than two weeks away. The general assumption is that the Fed would hike interest rates by 100 basis points in its bid to check inflation, which jumped to 9.1% in June to hit a 41-year high.

The worries took a toll on stocks in the early trading hours on Thursday. However, stocks pared most of the losses in the second half of the day after Federal Reserve Governor Christopher Waller said that he still believes a 75-basis point rate hike would be decent enough although a lot depends on economic data that is due to come out over the next couple of weeks.

Following Waller’s comments, the fed-funds future showed that the chances of a full percentage point rate hike went down to 42% from 80. Stocks pared some of the losses after that but still finished mostly lower.

Disappointing Start to Earnings Season

The earnings season kicked off on Thursday but there wasn’t much good news to lift investors’ spirits. Big banks opened the second-quarter earnings season but both JPMorgan Chase & Co. (JPM - Free Report) and Morgan Stanley (MS - Free Report) missed both earnings and revenue estimates.

JP Morgan posted second-quarter 2022 earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.85. Shares of JP Morgan declined 3.5%. Net revenues as reported were $30.7 billion, missing the Zacks Consensus Estimate of $31.7 billion. JP Morgan has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Morgan Stanley reported quarterly earnings of $1.44 per share, missing the Zacks Consensus Estimate of $1.55 per share. The company posted revenues of $13.13 billion for the quarter ended June 2022, which also missed the Zacks Consensus Estimate of $13.45 billion. Shares of Morgan Stanley finished 0.4% lower.

The disappointing results from the two major banks immediately took their toll on financial stocks, making the sector one of the worst performers on the Dow and S&P 500. A large number of banks will report quarterly results on Friday, which will also give a clearer picture of how things will shape up this earnings season.

Economic Data

Economic data released on Thursday once again painted a gloomy picture of the economy. The producer-price index rose 1.1% in June. On a year-over-year basis, the index climbed 11.3%. Excluding energy and food prices, Core PPI increased 6.4% year over year. However, it came in lower than May’s increase of 6.8%.

In other economic data released on Thursday, the Labor Department said that initial jobless claims came in at 244,000 for the week ending Jul 9, increasing 9,000 from the previous week’s revised level of 235,000. The four-week moving average also increased to 235,750, an increase of 3,250 from the previous week’s revised average of 232,500.

Continuing claims came in at 1,331,000, a decline of 41,000 from the previous week’s revised level. The previous week's numbers were revised down by 3,000 from 1,375,000 to 1,372,000. The 4-week moving average was 1,339,500, an increase of 5,250 from the previous week's revised average.


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