Stocks Fall as Fed Chairwoman Concerned About Housing Market; J.P. Morgan, Goldman Earnings Beat Estimates
U.S. stocks moved lower on Tuesday after Federal Reserve Chairwoman Janet Yellen expressed concern about valuations in some corners of the market.
In prepared testimony, Ms. Yellen singled out small-company stocks, as well as biotechnology and social-media shares as appearing to be "stretched."
Those comments overshadowed what traders said was otherwise friendly testimony for the stock market, with Ms. Yellen suggesting the Fed is in no rush to raise interest rates.
The Dow Jones Industrial Average fell 10 points, or 0.1%, to 17046 after rallying to an intraday high of 17120.34 earlier.
The S&P 500 index shed six points, or 0.3%, to 1971 and the Nasdaq NDAQ +0.03% Composite Index lost 30 points, or 0.7%, to 4410. The Russell 2000 was down 1.1%.
Stocks had gained earlier in the session following stronger-than-expected earnings from J.P. Morgan Chase JPM +3.66% & Co. and Goldman Sachs Group Inc. GS +0.77%
Ms. Yellen's comments about high
valuations in stocks and other assets are "definitely getting some
attention," said David Seaburg, head of equity sales trading at
brokerage Cowen and Co.
Shares of biotechnology and social-media companies saw heavy selling after the Fed testimony. The iShares Nasdaq Biotechnology ETF IBB -2.16% is down 1.6%, outpacing broader market declines. The Global X Social Media Index ETF is off 1.5%.
Stocks had risen Monday after a stronger-than-expected earnings report from Citigroup, C +1.26% as the Dow gained 0.7% to 17055.42. That is the second-highest close for the blue-chip index, which pushed above 17000 for the first time on July 3. The S&P 500 added 0.5% on Monday to end at 1977.10.
Stocks have hit a number of records in 2014, getting a lift by data pointing to a labor-market recovery and continued low interest rates. But stocks have been choppy in recent days as investors wait for corporate earnings to gauge whether the rally can continue. Companies in the S&P 500 are expected to see earnings grow about 4.6% in the second quarter from a year earlier, according to FactSet.
In the banking sector, J.P. Morgan Chase on Tuesday reported a decline in its second-quarter profit and revenue, but results beat expectations. Shares rose 2.2%.
Goldman Sachs said its second-quarter profit and revenue gained in the second quarter, easily topping forecasts. Goldman Sachs shares were up 1.1%.
A continuation of better-than-expected results from financial companies could push the stock market higher, said Mike Arone, chief investment strategist for State Street Global Advisors' U.S. Intermediary Business, pointing to Citi's earnings on Monday and the resulting rally. "Financials are a proxy for the overall health of the economy," he said.
Data released Tuesday also showed that U.S. retail sales rose a seasonally adjusted 0.2% in June from May, missing expectations for a gain of 0.6%.
In Europe, the Stoxx Europe 600 index fell 0.4%. Southern European stock indexes came under pressure Tuesday as fears of contagion from the trouble in the Portuguese banking sector spread to Italy and Spain.
The
pound rose against the euro and the dollar after data showed that U.K.
inflation accelerated in June, pointing to a continuation of the
country's economic recovery. The Office for National Statistics said the
annual rate of inflation rose to 1.9% in June from 1.5% in May.
In commodity markets, gold futures fell 0.9% to $1,294.50 an ounce, while crude-oil futures declined 1.7% to $99.22 a barrel. The yield on the 10-year Treasury note, which moves inversely to its price, rose 2 basis points to 2.567%.
In deal news, Reynolds American Inc. RAI -4.72% agreed to acquire Lorillard Inc. LO -7.77% in a cash-and-stock deal worth about $25 billion, the tobacco companies said Tuesday.
