Stock Market News Today: Markets struggle despite favorable CPI data (SP500)

U.S. stocks on Thursday came under pressure, as a slide in megacap technology names along with some disappointing corporate earnings offset favorable economic data on inflation.

In what has been a volatile trading session, Wall Street’s benchmark S&P 500 (SP500) and tech-heavy Nasdaq Composite (COMP:IND) indexes initially opened higher and scaled fresh intraday record highs. But they reversed course soon after and were now firmly in negative territory.

The S&P (SP500) was last down 0.85% to 5,586.22 points in midday trade, while the Nasdaq (COMP:IND) was lower by 1.73% to 18,325.51 points. The blue-chip Dow (DJI) was clinging onto gains of 0.04% at 39,738.84 points.

The rise after the opening bell came after investors earlier received the latest consumer price index (CPI) report for June. The U.S. Bureau of Labor Statistics reported an unexpected 0.1% M/M fall in headline CPI, the first such decrease since December 2022. Moreover, core CPI – which excludes food and energy – increased 0.1% M/M, its lowest level since August 2021.

Economists had been expecting a 0.1% and 0.2% M/M climb in headline and core CPI, respectively.

Market participants reacted to the CPI report by snapping up bonds, which sent U.S. Treasury yields plunging, and by strengthening their expectations for a 25 basis point interest rate cut by the Federal Reserve in September to nearly 90%.

That euphoria also helped the S&P (SP500) and Nasdaq (COMP:IND) advance immediately after the opening bell, but they quickly slid into the red.

“The market is doing quite well today, below the surface. It’s the mega cap tech stocks that are underperforming which is dragging the headline index down due to the huge weighting. The S&P 500 Equal Weight index (RSP) is up 1.2%, the Russell 2000 (RTY) is up 3%, microcaps are up 3.5%. The NYSE advance/decline is showing 2344 advancers to 315 decliners. ~83% of S&P 500 stocks are up today,” Keith Lerner, co-chief investment officer at Truist, told Seeking Alpha.

“Today’s combination of a soft inflation report and lower jobless claims is a Goldilocks number. It suggests the Fed should be able to cut rates in September, while the job market is cooling but still firm. This has provided confidence for investors to move beyond the perceived safeness of mega cap tech into other areas of the market and interest sensitive areas (real estate, materials, industrials and utilities are outperforming),” Lerner added.

The performance of the 11 S&P sectors indeed backed up Lerner’s comments. Heavyweight growth areas Technology and Communication Services slipped more than 2.5% each, as each member of the “Magnificent 7” club logged declines. On the other hand, Real Estate, Utilities and Materials rounded out the top three gainers.

Turning to the fixed-income markets, U.S. Treasury yields hit multi-month lows as traders bought bonds. The longer-end 30-year yield (US30Y) was down 10 basis points to 4.39%, while the 10-year yield (US10Y) was down 11 basis points to 4.18%. The shorter-end, more rate-sensitive 2-year yield (US2Y) was down 13 basis points to 4.51%.

See live data on how Treasury yields are doing across the curve on the Seeking Alpha bond page.

Also in focus on Thursday was the second quarter earnings season, which will unofficially begin tomorrow as major U.S. banks will report results. But there were some big names delivering numbers today as well.

Top U.S. carrier Delta Air Lines (DAL) warned of lower fare discounting despite record revenue on the back of surging travel demand. The stock was among the top percentage losers on the S&P 500 (SP500), and other airlines also took a hit.

Meanwhile, consumer companies PepsiCo (PEP) and Conagra (CAG) both delivered guidance that rattled investors, with the soft drinks giant cutting its annual organic revenue growth outlook and the latter – which owns food brands such as Slim Jim, Duncan Hines and Swiss Miss – issuing fiscal 2025 forecasts that fell short of expectations.