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The stock market turned up underwhelming numbers on Thursday as talks of a recessionary plunge continue to dominate the financial outlook.
The stock market plunge that has characterized recent weeks extended further on Thursday following disappointing earnings reports from leading banks. Financial optics remained bleak in the face of looming recession as traders and economists contemplated yet tighter Fed monetary policy.
Two out of the three major indexes finished lower amid the pervading stock market plunge. For instance, the Dow Jones Industrial Average gave up 142.62 points, or 0.46%, to close at 30,630.17. In addition, the S&P 500 also shed 0.3% to 3,790.38. Meanwhile, the Nasdaq Composite, known for featuring sensitive big tech stocks, inched 0.03% higher to finish at 11,251.19.
The Dow’s losses were led by declines from JPMorgan (NYSE: JPM), Goldman Sachs (NYSE: GS), and American Express (NYSE: AXP). Meanwhile, the biggest losers on the S&P came from the energy, materials, and financial sectors. The Nasdaq saw mixed results among its big tech mainstays, with information technology stocks up 1%. The shares of consumer electronics giant Apple (NASDAQ: AAPL) and semiconductor giant Nvidia (NASDAQ: NVDA) gained 2% and over 1%, respectively. Conversely, social media heavyweight Meta Platforms (NASDAQ: META) and cloud computing company Salesforce (NYSE: CRM) saw their stocks slide.
Equities were well on course to end the week in the red once again. Weighing in on this pattern vis-à-vis disappointing earnings from big bank names so far, chief investment strategist at CFRA Sam Stovall said:
“If the banks are a barometer of the whole economy as well as what we’re likely to get from other earnings reports going forward, it’s going to be an ugly quarter.”
Stock Market Plunge Defined by Latest Big Bank Quarterly Reports & Looming Additional Fed Rate Hikes
Investors and market analysts paid close attention to the latest earnings reports from prominent financial institutions. Analysts believe the reports could provide cues for how the US economy would likely fare as recession looms.
New York-based banking giant JP Morgan’s Thursday’s financial Q2 report revealed a 3.5% decline in company shares. According to JP Morgan, the reason for the stock underperformance is huge bad loan reserves. Furthermore, the leading bank’s CEO Jamie Dimon also forewarned of more gloomy prospects regarding the economy in the near future.
As a result of surging Fed-induced interest rates, many banks saw their earnings estimates increase perhaps a little too much. This has raised some concerns because of the likelihood that the numbers will plunge because of inflation. Commenting on this trend, Bob Doll, chief investment officer at Crossmark Global Investments, stated:
“The market is finally concerned about the fact that estimates, having gone up almost nonstop during the first half of this year, are going to be under some pressure, and of course today’s culprit is JPMorgan.”
Doll further opined that such earnings did not bode well for an economy teetering on the brink of a recession. He concluded by saying that “[these numbers] have to come down.”
The stock market underperformance from Thursday also comes on the heels of the recently-released consumer price index (CPI) for June. Coming in at 9.1%, CPI has likely triggered the possibility of the Fed hiking rates even further later this month to potentially 100 basis points.