Nasdaq 100, Dow Jones, S&P 500: Investors Brace for Inflation Reports Amid Regional Bank Share Drop

Highlights

• Investors are concerned about inflation as crucial reports approach.
• Lucid, PayPal, and Skyworks see declines in share prices following quarterly reports.
• If the debt ceiling is not raised,” warns Treasury Secretary Janet Yellen, “it would result in an economic catastrophe.

Overview

As stock futures faced downward pressure on Tuesday led by a decline in shares of regional banks, investors brace for crucial inflation reports scheduled for later this week.

Futures linked to the Dow Jones Industrial Average dropped 121 points, or 0.36%, while S&P 500 futures and Nasdaq-100 futures both slid by 0.36%.

After a lackluster session on Monday, the three primary indexes ended the day with modest changes. The S&P 500 managed to finish 0.05% higher, while the Nasdaq Composite registered a gain of almost 0.2%. However, the Dow had a weaker performance and closed nearly 0.2% lower.

Bank Shares Drop

In the premarket, PacWest shares experienced a significant decline of over 8% following a volatile session where the regional bank had risen over 3%. Investors remained concerned about the state of the U.S. banking system, causing the SPDR S&P Regional Banking ETF (KRE) to dip 0.8%.

Following their quarterly reports, Lucid, PayPal, and Skyworks all saw declines in their share prices. On the other hand, Palantir saw a surge of 20% in its stock price, thanks to a strong earnings report and positive guidance.

Today, the markets show relatively subdued price action, and investors collectively breathe a sigh of relief that the reports are not worse than anticipated.

Lucid, Palantir Surge; PayPal, Skyworks Slide

After hours trading saw some significant moves in the following stocks:

Electric vehicle maker Lucid saw an 8% decline after reporting growing losses in the first quarter. Despite having enough cash to continue operating into next year, the company missed revenue expectations by reporting $149.4 million, falling short of the $209.9 million consensus estimate from analysts polled by Refinitiv.

Software stock Palantir soared 22% after exceeding analysts’ Q1 expectations and providing a positive outlook. Palantir reported adjusted earnings per share of 5 cents on $525 million in revenue, surpassing Refinitiv’s forecast of 4 cents per share and $506 million in revenue. The company also issued a strong outlook for full-year profitability.

Shares of digital payments company PayPal declined approximately 5.5% as the company released weak current-quarter earnings per share expectations, despite raising its full-year guidance for the same metric. However, PayPal did manage to surpass Refinitiv’s Q1 top and bottom line expectations.

Semiconductor stock Skyworks fell nearly 9%, despite reporting strong business fundamentals in Q2. The company’s Q3 earnings and revenue guidance fell below Wall Street expectations, resulting in the stock taking a hit. Skyworks posted Q2 earnings of $2.02 per share, excluding items, in line with analysts’ expectations. Revenue was also in line with the Street’s forecast.

Traders Await Key Inflation Reports, Yellen Warns

Traders are anticipating the release of April’s consumer price index report on Wednesday and the producer price index on Thursday for the latest inflation data. These reports will provide crucial information on the trajectory of inflation.

In other news, Treasury Secretary Janet Yellen warned on Monday afternoon’s CNBC that failing to raise the debt ceiling would result in an “economic catastrophe.” She also clarified that regulators are not close to implementing any policies that would restrict short-selling of regional bank stocks.

Investors Eye Fed Speeches, Earnings Reports Today

Investors will closely monitor morning data from the National Federation of Independent Business on Tuesday. Throughout the day, scheduled speeches by Fed Governor Philip Jefferson and New York Fed President John Williams.

Before the bell, Fox Corp. and Nikola are among the companies expected to report quarterly earnings, followed by Airbnb and Rivian after the market closes. With more than 85% of S&P 500 stocks having reported their earnings, the earnings season is beginning to wind down.