The S&P 500 recorded its second decline in three sessions on Tuesday, dragged lower by financial stocks despite encouraging inflation data. Mixed bank earnings overshadowed cooler-than-anticipated CPI figures, sending the benchmark index down 0.4% after briefly breaching the psychologically significant 6300-point level earlier in the trading day. While the Nasdaq 100 eked out a 0.1% gain to notch another record close, banking sector weakness curtailed broader market momentum.
Financial giants weighed heavily on sentiment: Wells Fargo (WFC.US) plunged 5.5% after trimming its full-year net interest income forecast, while BlackRock (BLK.US) slid 5.9% as the asset manager's Q2 net inflows fell short of analyst projections. Ten of the S&P 500's eleven sectors closed in negative territory, with financials, materials, and healthcare leading declines. Only technology stocks managed gains. The KBW Bank Index saw all 24 components drop except Citigroup (C.US), which climbed 3.7% after traders capitalized on tariff-induced volatility to deliver its strongest second-quarter performance in five years. JPMorgan (JPM.US) dipped 0.7% despite an unexpected uptick in investment banking revenue.
Traders brace for the weakest earnings season since mid-2023 as the S&P 500 hovers merely 0.6% below its all-time high, while weighing tariff uncertainties stemming from Trump-era trade policies. Analysts now project just 2.5% year-over-year profit growth for S&P 500 companies in Q2, with full-year expectations downgraded to 7.1% from April's 9.4% forecast. Earnings reports from Goldman Sachs (GS.US), Morgan Stanley (MS.US), and Bank of America (BAC.US) loom in coming days.
Earlier market optimism followed a Bureau of Labor Statistics report showing subdued inflation, potentially clearing the path for Federal Reserve rate cuts. Core CPI, excluding volatile food and energy prices, rose just 0.2% month-over-month in June, below the 0.3% consensus. "Controlled inflation enables the Fed to cut rates—potentially as soon as September," noted Chris Zaccarelli, CIO at Northlight Asset Management. "Subsequent contradictory data would force further delays."
Tech provided bright spots: Nvidia (NVDA.US) surged 4% after securing U.S. approval to resume H20 AI chip sales in China, lifting semiconductor peers AMD (AMD.US) and Broadcom (AVGO.US). The Philadelphia SE Semiconductor Index advanced 1.3%. Apple (AAPL.US) edged up 0.2% following a $500 million rare earth minerals supply deal with Pentagon-backed U.S. producer MP Materials (MP.US). The "Magnificent Seven" basket including Alphabet (GOOGL.US) and Meta (META.US) gained 0.4%.
Other notable movers included Trade Desk (TTD.US), which jumped 6.6% on news of its upcoming S&P 500 inclusion effective July 18. Conversely, wound care product manufacturers slumped on proposed U.S. payment methodology changes for skin substitutes, sending MiMedx (MDXG.US) down 6.9% and Organogenesis (ORGO.US) tumbling 10%. The CBOE Volatility Index hovered near 17.3.