The S&P 500 and Nasdaq reached fresh record highs but quickly fell into negative territory after an auction of 30-year Treasuries showed less demand than some investors expected and pushed yields higher.
Data indicated U.S. consumer prices rose by the most in 13 years last month, while so-called core consumer prices surged 4.5% year over year, the largest rise since November 1991.
Economists viewed the price surge, driven by travel-rated services and used automobiles, as mostly temporary, aligning with Federal Reserve Chair Jerome Powell’s long-standing views.
“Any time you get an uptick in interest rates the stock market is going to get nervous, especially on a day like today,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The S&P 500 growth index dipped 0.05%, while the value index fell 0.70%.
“With growth outperforming value, the takeaway is clearly that inflation from a market perspective is not a real threat in the long term,” said Keith Buchanan, a portfolio manager at GLOBALT Investments in Atlanta, Georgia.
Ten of the 11 major S&P 500 sector indexes ended lower, with real estate, consumer discretionary and financials each down more than 1%.
JPMorgan Chase & Co stock fell 1.5% after the company reported blockbuster quarterly profit growth but warned that the sunny outlook would not make for blockbuster revenues in the short term due to low interest rates.
Goldman Sachs Group Inc dipped 1.2% after its quarterly earnings exceeded forecasts.
Citigroup, Wells Fargo & Co and Bank of America were due to report their quarterly results early on Wednesday.
PepsiCo Inc gained 2.3% after raising its full-year earnings forecast, betting on accelerating demand as COVID-19 restrictions continue to ease.
June-quarter earnings per share for S&P 500 companies are expected to rise 66%, according to Refinitiv data, with investors questioning how long Wall Street’s rally would last after a 16% rise in the benchmark index so far this year.
All eyes now turn to Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday for his comments about rising price pressures and monetary support going forward.
The Dow Jones Industrial Average fell 0.31% to end at 34,888.79 points, while the S&P 500 lost 0.35% to 4,369.21.
The Nasdaq Composite dropped 0.38% to 14,677.65.
Conagra Brands Inc dropped 5.4% after the packaged foods company warned that higher raw material and ingredient costs would take a bigger bite out of its profit this year than previously estimated.
Boeing Co fell 4.2% after the Federal Aviation Administration said late on Monday some undelivered 787 Dreamliners have a new manufacturing quality issue.
Declining issues outnumbered advancing ones on the NYSE by a 2.85-to-1 ratio; on Nasdaq, a 3.06-to-1 ratio favored decliners.
The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 61 new highs and 73 new lows.
Volume on U.S. exchanges was 9.5 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.
For a look at all of today’s economic events, check out our economic calendar.
(Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Cynthia Osterman)