NEW YORK (AP) – Wall Street moved lower after some mixed earnings reports, as stocks remained largely stagnant for more than a month. The S&P 500 fell 0.5% on Tuesday and the Dow Jones Industrial Average lost 56 points, or 0.2%. The Nasdaq fell 0.6%. The next major milestone for the market will be Wednesday’s report on inflation, which has come down but remains high. This could dictate the Federal Reserve’s next move on interest rates. Political leaders are also meeting in Washington on Tuesday to try to avoid default on US government debt.
This is breaking news update. Below is an earlier AP story.
NEW YORK (AP) – Wall Street edged lower Tuesday after some mixed earnings reports, as stocks remained largely stagnant for more than a month.
The S&P 500 was lower 0.3% in late trading. The Dow Jones Industrial Average was down 20 points, or 0.1%, at 33,598 with less than an hour left in trading, while the Nasdaq Composite was lower 0.5%.
PayPal fell 11.8% despite reporting better-than-expected profit and revenue for the latest quarter. Analysts pointed to its forecast of how much less profit is expected from every $1 of revenue, which may have disappointed some investors.
Electric automaker Lucid Group dropped 7.2% after reporting a bigger-than-expected loss for the latest quarter.
Skyworks Solutions sank 5% after reporting profit that matched forecasts for the first three months of the year. The company’s comments about weakness in demand from China for Android phones have spooked investors.
On the winning side of Wall Street was Palantir Technologies. It soared 23.3% after reporting stronger-than-expected profit and calling demand for its new artificial intelligence platform “unprecedented.”
So far this earnings reporting season, which is nearing its final stage, most companies have topped forecasts for first quarter results. This is largely because expectations were low due to a slowing economy and high interest rates. Companies in the S&P 500 are still on track to report a second straight quarter of profits that weakened from year-ago levels.
“Companies have been able to perform very well,” said Margie Patel, senior portfolio manager at Allspring Global Investments.
Fears of better results have given some support to Wall Street while a host of other concerns weigh on it.
Chief among them is what will happen to the US banking system, which has been under stress since March following three high-profile bank failures. Hurt by very high interest rates, small and medium-sized banks are scrambling to assure everyone that their deposits are stable and they are not at risk of a sudden exodus of customers.
Stocks of regional banks were volatile on Tuesday under the heaviest scrutiny by Wall Street. PacVest Bancorp rose 5.8% after recovering from early losses. Western Alliance Bancorp also climbed 2.3% after swinging from losses to gains.
The next major milestone for the market will be Wednesday’s report on consumer level inflation. Inflation has come down from its peak last summer, but it is still very high. This has increased uncertainty about what the Federal Reserve’s next move will be.
The central bank has already raised its benchmark interest rates to a range of 5% to 5.25%, from near zero at the beginning of last year. Higher rates can reduce inflation, but only by suffocating the economy and bluntly hurting investment prices.
Many investors are bracing for a recession later this year as banks are likely to pull back on lending due to very high rates as well as industry troubles. Even though the job market remains resilient and the unemployment rate is remarkably low, other sectors of the economy have shown greater weakness, such as manufacturing.
“It seems that although they have more data and information than anyone, the Fed is focused on the inflation rate and the unemployment rate rather than looking at the bigger picture,” said Allspring’s Patel. “What does the man on the street see? I think they see a lot more things to be concerned about than the Fed.”
He expects the shares to have a positive return this year, but he quickly added that this is not expected.
“I want to be optimistic, but when you look at the facts, you have to temper it a little bit,” she said.
Yields have declined since early March on concerns about a recession and expectations of a possible rate cut by the Fed.
Also looming over the market is the June 1 deadline. This was a time when the US government could potentially run out of cash to pay its bills unless Congress allowed it to borrow more. There are widespread expectations that Congress will come to an agreement before that deadline because the alternative would cause serious damage to the economy and financial markets.
But every day that passes without a deal threatens to raise concerns. President Joe Biden will hold a meeting with Congressional leaders after the US stock market closes for trading on Tuesday.
Crude oil declined on concerns of weak demand. Stocks also fell 2.1% in Shanghai after a report showed imports into China fell sharply last month.
In the bond market, the 10-year Treasury yield rose to 3.52% from 3.51% late on Monday. The two-year Treasury yield, which trades higher on Fed expectations, rose to 4.01% from 4.00%.
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AP Business Writers Yuri Kagiyama and Matt Ott contributed.
Stan Choe, The Associated Press
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