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Financial Markets 07/31 15:28
Stocks gave up early gains and closed lower on Wall Street, led by drops in
health care companies. The S&P 500 fell 0.4% Thursday. The Dow Jones Industrial
Average lost 0.7%, and the Nasdaq composite slipped less than 0.1%. Health care
stocks sank after the White House released letters asking big pharmaceutical
companies to cut prices and make other changes in the next 60 days. Meta
Platforms surged after the parent company of Facebook and Instagram crushed
Wall Street's sales and profit targets even as the company continues to pour
billions of dollars into artificial intelligence.
THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.
Stocks indexes were mixed in afternoon trading on Wall Street Thursday after
a health care sector slide offset some of the gains from a rally among big tech
companies.
The S&P 500 was up less than 0.1%, holding just below the record high it set
on Monday. The Dow Jones Industrial Average fell 88 points, or 0.2%, as of 2:51
p.m. Eastern. The technology-heavy Nasdaq rose 0.3% and is on track for a
record.
Health care stocks were the biggest drag on the market after the White House
released letters asking big pharmaceutical companies to cut prices and make
other changes in the next 60 days. Eli Lilly & Co. fell 2%, UnitedHealth Group
slid 4.9% and Bristol-Myers Squibb was 4.5% lower.
Roughly 70% of stocks in the S&P 500 were losing ground, but big technology
stocks with hefty values helped temper the impact of losses in health care and
other sectors.
Technology stocks rose following results from big companies showcasing
advancements in artificial intelligence.
Facebook and Instagram's parent company Meta Platforms surged 11.9% after it
crushed Wall Street's sales and profit targets even as the company continues to
pour billions into artificial intelligence.
Microsoft jumped 4.1% after also posting better results than analysts
expected. The software pioneer also gave investors an encouraging update on its
Azure cloud computing platform, which is a centerpiece of the company's
artificial intelligence efforts.
Fellow technology giants Apple and Amazon will report their results after
the closing bell. Big Tech companies have regularly been the driving force
behind much of the market's gains over enthusiasm for the future of artificial
intelligence.
Earnings remained a key focus outside of the technology sector in what has
been a heavy week so far for corporate financial results. CVS Health rose 0.3%
after it topped Wall Street expectations for the second quarter and raised its
full-year forecast again.
Wall Street is also monitoring the latest economic data, which included an
update on inflation.
The Commerce Department said prices rose 2.6% in June compared with a year
ago, as measured by the personal consumption expenditures index. That's the
Federal Reserve's preferred measure for inflation. The latest reading was
slightly higher than economists expected and also marks an increase from an
annual pace of 2.4% in May.
Results from another measure of inflation earlier this month, the consumer
price index, also showed inflation rising in June.
Also on Thursday, a report showed that the number of Americans filing for
unemployment benefits inched up last week.
The latest updates on inflation and the jobs market are landing amid
lingering concerns about the impact of tariffs. Inflation's temperature is
being closely monitored by businesses and the Fed to better gauge the impact of
President Donald Trump's on-again-off-again approach to import taxes. Companies
including Ford and Hershey's have more recently warned that tariffs are
weighing on their latest and projected financial results.
Trump has said he will levy tariffs against goods from dozens of countries
if they don't reach agreements with the U.S. by Friday. The latest developments
in the seemingly unpredictable tariff landscape include a potential pause in
tariff escalations with China and a deal with South Korea.
The reasons behind trade policy decisions remain unpredictable. Trump, on
Wednesday, signed an executive order to impose his threatened 50% tariffs on
Brazil. He has directly linked the import tax to the trial of his ally, the
country's former president Jair Bolsonaro. He has also said that trade
negotiations with Canada would be more difficult in the wake of that nation's
economically unrelated decision to recognize a Palestinian state.
Uncertainty over tariffs and inflation have prompted the Fed to leave its
benchmark interest rate alone through the central bank's past five meetings,
including the one that ended Wednesday. The Fed has been trying to cool the
rate of inflation back to its target of 2%. It has come close, but inflation
remains stubbornly stuck just above that target.
A cut in rates would give the job market and overall economy a boost, but it
could also risk fueling inflation. Fed Chair Jerome Powell has been pressured
by Trump to cut the benchmark rate, though that decision isn't his to make
alone, but belongs to the 12 members of the Federal Open Market Committee.
"Inflation is only a bit above the Fed's target, but looks likely to rise in
the second half of the year due to tariffs," said by Bill Adams, chief
economist for Comerica Bank. "With the job market in pretty good shape, they
see room to hold interest rates steady and lean against inflation's increase
near-term."
Wall Street has been tempering their expectations for rate cuts at the Fed's
next meeting in September. Traders now see a 39% chance of a rate cut,
according to data from CME Group. That's down from 58.4% a week ago and a 75.4%
chance a month ago.
Treasury yields held steady in the bond market. The yield on the 10-year
Treasury slipped to 4.36% from 4.37% late Wednesday. The yield on the two-year
Treasury remained at 3.94% from late Wednesday.
Markets were mostly mixed in Asia and Europe.
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