U.S. stocks were weaker on Friday after a sharp drop in technology shares as investors assessed earnings reports from Wall Street’s biggest banks and awaited inflation data that could test growing hopes of a rate cut.
S&P 500 futures (ES=F) were trading flat, not far from the index’s recent all-time highs. Futures for the Dow Jones Industrial Average (YM=F) and the tech-heavy Nasdaq 100 (NQ=F) were also little changed.
Stocks were stabilizing after the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) ended seven-day winning streaks on Thursday as optimism about lower interest rates led to outflows from big tech stocks.
Earnings season is in full swing before the bell with a series of quarterly earnings reports from Wall Street banks that could test the sector rally that has outpaced the S&P 500 this year.
JPMorgan Chase (JPM) profits surged 25% in the second quarter, buoyed by higher investment banking fees and a one-time $8 billion Visa-related gain, but its shares slid. Wells Fargo (WFC) shares fell 6% after the bank reported lower profits due to weaker-than-expected interest income. Citigroup (C) is also set to go public on Friday.
At the same time, the market is looking to shift away from this year’s winners, Nvidia (NVDA) and the “Magnificent Seven” technology companies (which just recorded their worst day in nearly a year), and towards the likes of utility and real estate stocks.
Thursday’s rotation out of tech stocks came as investors took a surprisingly mild June consumer price index reading as a reason for the Federal Reserve to cut interest rates. The market has largely priced in a September rate cut, according to the CME FedWatch tool, and expectations are growing that a second cut will come in December.
The debate has now shifted from whether the Fed will act to how often and to what extent, with some on Wall Street expecting rates to be cut by as much as 0.75% by the end of the year. With that in mind, investors will be watching the June producer price index, due out later on Friday, for any indication of easing price pressures.
live1 update
