Nasdaq 100, Dow Jones, S&P 500: Stocks Fall as Investors Await CPI Report, Amid Debt Ceiling Talks

Highlights

• U.S. stocks close lower as investors turn cautious.
• CPI report and debt ceiling talks increase anxiety in the market.
• Disappointing earnings and regional banking stress add to market uncertainty.

Overview

On Tuesday, U.S. stock indexes ended lower as investors became more cautious ahead of the release of the U.S. consumer price index report and a meeting between U.S. political leaders to discuss the debt ceiling.

The market is anticipating the CPI report for clues on whether inflation is continuing to ease. Meanwhile, concerns over a potential government default loom due to a deadlock in Congress. The meeting between U.S. President Joe Biden, Republican House Speaker Kevin McCarthy, and other congressional leaders is expected to provide an update on plans for the debt ceiling. Both inflation and the debt ceiling are causing anxiety in the market.

The Dow Jones Industrial Average fell 0.17%, the S&P 500 lost 0.46%, and the Nasdaq Composite dropped 0.63%. Volume on U.S. exchanges was lower than the average for the last 20 trading days. Declining issues outnumbered advancing ones on both the NYSE and Nasdaq, and new lows exceeded new highs.

Pacwest Bancorp’s Volatile Day Reflects Uncertain Banking Climate

Pacwest Bancorp experienced a volatile day, initially leading losses in regional banks before recovering to close up 2.35%. While any relief in regional banking stress is positive, it is premature to conclude that things have returned to normal based on the performance of a few struggling banks.

Philly Semiconductor Index Falls, Novavax Surges, Under Armour Disappoints

The Philadelphia SE Semiconductor Index closed down 1.87%, with shares of Apple suppliers such as Qualcomm, Broadcom, Qorvo, and Corning ending lower. Meanwhile, Boeing Co rose 2.34% following a multi-billion dollar order from Ryanair Holdings Plc for Boeing jets. Novavax saw a surge of 27.79% after announcing a 25% reduction in its global workforce. Conversely, Under Armour Inc fell 5.66% due to its annual sales and profit forecast falling below street expectations. On the other hand, dialysis services provider DaVita Inc rose 12.90% as demand for procedures picked up in the U.S. and the company raised its annual profit forecast.

Disappointing Forecasts Dampen Market Sentiment

Market sentiment was dampened by disappointing forecasts from several companies, including PayPal and Skyworks. PayPal Holdings saw a 12.73% drop in its shares after the company revised down its margin forecast, which also impacted the benchmark S&P 500 and the Nasdaq. Meanwhile, Skyworks Solutions Inc shares declined as the company projected lower revenue and earnings for the current quarter, below estimates. Despite generally positive earnings results, the current earnings season has been volatile. And today’s weaker results are having a slight impact on the market.

Short-Term Forecast:  Cautious Tone

Investors are likely to remain cautious in the coming days, as the U.S. debt ceiling deadline looms and a potential government default continues to be a concern. Additionally, the release of the U.S. Consumer Price Index report has investors on edge, as they look for signs that inflation is easing. The banking sector may also see some volatility, with concerns over regional banking stress and its impact on the broader market.