S&P 500 Flat as Energy Slips, Bank Stocks Shine By

© Reuters

By Yasin Ebrahim

-- The S&P 500 was flat Tuesday, as investors weighed up gains in financials ahead of the quarterly earnings from banking stocks against a wobble in energy after oil prices slipped amid ongoing demand concerns.

The S&P 500 fell 0.01%, the Dow Jones Industrial Average fell 0.29%, or 89 points, the Nasdaq was up 0.01%

Financials were up nearly 1%, led by banking stocks as investors look ahead to second-quarter results from major Wall Street banks this week. 

JPMorgan (NYSE:JPM) kicks off the quarterly earnings season in earnest on Thursday, followed by Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) on Friday.

Energy stocks fell more than 2% after the Organization of the Petroleum Exporting Countries flagged fresh demand concerns, forecasting oil demand to rise at a slower pace in 2023. 

Growing worries about a recession had soured investor sentiment on banks recently, but “2Q results should be solid/strong as should the outlook as it's too early for banks to build meaningful loan loss reserves for a potential US recession,” Deutsche Bank said in a note.

The gains for bank stocks come against a backdrop of falling Treasury yields, a drag on bank stocks, though many point to the inflation data due tomorrow that could cement bets on the Federal Reserve hiking rates by 0.75% again this month.

“We expect still-strong 0.5% m-o-m core CPI inflation in June, setting up another 75bp hike at the July FOMC meeting; inflation expectations data bear monitoring,” Nomura said ahead of the consumer price index data due Wednesday.

In big tech, meanwhile, Microsoft (NASDAQ:MSFT) was the biggest loser falling nearly 2% after the tech giant announced jobs cuts that would affect less than 1% of the company.

The job cuts come just as tech research firm Gartner (NYSE:IT) reported that PC shipments fell 13% in the third quarter, stoking concerns about weaker demand for Microsoft’s Windows operating system segment.

Twitter (NYSE:TWTR), meanwhile, rose more than 4% to claw back some of its recent losses after it said Elon Musk’s allegations that it had breached the terms of its $44 billion deal were “invalid and wrongful.”

Twitter is likely to “go head to head against Musk in a Game of Thrones court battle to recoup the deal and/or the breakup fee of $1 billion at a minimum,” according to research firm Wedbush.

On the earnings front, PepsiCo (NASDAQ:PEP) gave up gains to trade roughly flat despite raising its full-year guidance after quarterly results topped Wall Street estimates.

Boeing (NYSE:BA), meanwhile, reported that it delivered 51 airplanes in June, topping the 50 milestone for the first time since March 2019. 

In other news, Peloton Interactive (NASDAQ:PTON) said it would outsource in-house manufacturing to Taiwan to cut costs and simplify its supply-chain structure at a time when the fitness-equipment maker is facing waning demand.

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