S&P 500 Off Lows as Bets on Mega Rate Hike Ease; Banks Glum on Earnings Miss

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S&P 500 Off Lows as Bets on Mega Rate Hike Ease; Banks Glum on Earnings Miss
Credit: © Reuters.

By Yasin Ebrahim

Investing.com -- The S&P 500 cut losses Thursday, as Federal Reserve officials downplayed the prospect of a 1% rate hike, though disappointing quarterly results from major Wall Street banks fueled recession fears and soured investor sentiment.

The S&P 500 fell 0.9%, the Dow Jones Industrial Average fell 1.0%, or 315 points, the Nasdaq was down 0.57%. All three major averages were down more than 2% at the lows of the session. 

JPMorgan (NYSE: JPM ) said it would temporarily pause share buybacks after reporting second-quarter earnings that fell short of estimates, sending its shares more than 3% lower.

The Wall Street bank also set aside more money than expected for potential loan losses, raising concerns about the strength of the U.S. consumer.

Morgan Stanley (NYSE: MS ) also reported a miss on second-quarter earnings , driven by weaker performance in its investment banking business. Its shares fell more than 2%.

Wells Fargo (NYSE: WFC ) and Citigroup (NYSE: C ), which both report on Friday, were down more than 1%.

Technology turned positive as Treasury yields retreated after Federal Reserve governor Christopher Waller played down the prospect of the Federal Reserve rolling out an unprecedented 1% rate hike later this month.  

“You don't want to overdo rate hikes,” Waller said Thursday, adding that the market had got "ahead of themselves" on pricing a 100 basis point hike, though he didn’t rule out the prospect of a larger hike. 

“If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting,” he added.

St. Louis Federal Reserve President James Bullard reportedly also said he would favor a 75 basis point hike at the July meeting.

The odds of a 1% rate hike fell to about 50% from 80% a day earlier, according to Investing.com’s Fed Rate Monitor Tool.

Chip stocks erased losses underpinned by a 2% climb in chip bellwether Taiwan Semiconductor Manufacturing (NYSE: TSM ) following quarterly results that beat on both the top and bottom lines.

The chipmaker also raised its full-year revenue forecast, helping to cool concerns somewhat about the chip demand outlook.

Energy was also one of the major decliners as oil prices added to recent losses on concerns that a global recession will dent demand for energy.

APA (NASDAQ: APA ), EOG Resources (NYSE: EOG ), and Coterra Energy (NYSE: CTRA ), each down more than 5%, led the move lower in energy.

In other news, Cisco (NASDAQ: CSCO ) fell nearly 2% as JPMorgan downgraded the stock to neutral from outperform on worries that “supply and spending hesitations” will weigh on demand.

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