For the Dow Jones, there was a tug of war between its large banking constituents, most of which ended higher after reporting record trading revenue and profits for the second quarter, and IBM, which plunged 25% to mark its biggest single-day fall in nearly six decades!
The clash meant that the Dow Jones ended just above the flat line on Tuesday, while the S&P 500 gained 0.4%. The Nasdaq Composite was up 0.9%, while the Nasdaq 100 index gained 1.1%.
Shares of Goldman Sachs surged 9% on Tuesday to end at a record high after reporting trading revenue of $7.42 billion during the quarter, surpassing even the highest estimate on the street. Shares of JPMorgan and Bank of America also ended at their respective record high levels after their trading revenue and quarterly results surpassed expectations.
Citigroup’s shares fell over 5% even as its trading revenue grew by 45% during the quarter but was lower than its peers. Wells Fargo shares dropped over 2% as well after its results.
Concerns also eased after the first drop in consumer price inflation data in six years with the June CPI coming in at a negative 0.4% month-on-month and rising 3.5% year-on-year. Economists still believe that while this does give the Federal Reserve some breathing space, the phenomenon is not over yet.
Similar sentiments were echoed by Fed Chair Kevin Warsh in his testimony to the Congress where he said that while some people may believe all is well after this inflation report, he does not think so. He went on to add that policymakers will use every tool possible to ensure that inflation is a “thing of the past.”
Why IBM Shares Fell 25% on Tuesday?
Shares of IBM dropped 25% on Tuesday, the biggest single-day fall since at least 1968 after its second quarter preliminary report missed analyst expectations on both the topline and the Earnings per Share (EPS) front.
CEO Arvind Krishna attributed the miss due to a slowdown in software services as clients shifted budgets to purchase more hardware such as memory chips. He also acknowledged that the company did not move fast enough to close deals that spilt over, leading to this miss.
Later today, the US will await data on the Producer Price Index (PPI), along with more Fed officials speaking, and results from Morgan Stanley, ASML, Johnson & Johsnon and BlackRock, among others.
