Stocks slipped Tuesday afternoon, after all three major U.S. stock benchmarks clinched records on Monday, as investors sifted through hotter-than-expected U.S. consumer-price index data and parsed quarterly results from some of the country’s biggest banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc.

How are stock benchmarks trading?

The Dow Jones Industrial Average
DJIA,
-0.26%

was down 96.5 points, or 0.3%, at 34,899.68.

The S&P 500
SPX,
-0.33%

dipped about 10.10 points, or 0.2%, to 4,374.53.

The Nasdaq Composite
COMP,
-0.46%

declined 28.6 points, or 0.2%, to 14,704.66.

On Monday, all three stock benchmarks finished at all-time highs for the second straight session with the Dow narrowly missing its first close above 35,000, rising 0.4% to end at a record 34,996.18.

What’s driving the market?

“The knee jerk reaction to the hotter than expected CPI data today was negative,” said Thomas H. Kee, chief executive of Stock Traders Daily, in a note, but while stocks initially recovered from the morning’s dip, the major stock benchmarks were back on the decline in afternoon trading.

The U.S. consumer-price index showed a 0.9% June rise. The core reading, which strips out volatile food and energy costs, also rose 0.9%. Both measures were expected to show a 0.5% rise.

Year over year, the headline CPI was up 5.4% in June, while the core rate, excluding food and energy costs, rose 4.5% year-over-year, the sharpest move for that measure since September 1991 and well above the estimate of 3.8%.

“All you have to do is go grocery shopping or fill your car up with gas to know there’s inflation”, said Michael Loukas, CEO of TrueMark Investments, in a phone interview Tuesday. “We all know it’s out there,” he said. “Being surprised by this would kinda be like having your head in the sand.” 

While the data will stir the debate about whether the Federal Reserve has fallen behind the curve when it comes to inflation by insisting that rising prices will be a “transitory” phenomenon, investor fears of a bout of runaway inflation for now look in check.

Kee argued that investors generally look for inflation, much like earnings growth, to peak soon.

“Reasonably, hot inflation data should still be expected, but if inflation is akin to the upcoming change in earnings growth rates for the market, the next installment of CPI will be tamer,” he wrote. “If the CPI data is this hot next time, it will be a more material concern.”

Kristina Hooper, chief global market strategist at Invesco, said in an interview Tuesday that she still believes “inflation is largely transitory.” The latest CPI data show rising costs are “concentrated in areas that synch with the reopening,” Hooper said, pointing to transportation as an example. Hooper also said she expects the economy to keep growing this year, with a “pandemic resurgence” now being the biggest tail risk that she sees for the stock market.

Meanwhile, growth stocks were up Tuesday afternoon, with the Russell 1000 Growth index
RLG,
-0.02%

showing a 0.1% gain while the Russell 1000 Value index
RLV,
-0.51%

was down 0.6% according to FactSet.

“The market is addicted to growth. It just is,” said Loukas. “Even when it rotated in value, it was begging for growth.” Investors may be turning to secular growth stocks as a hedge against inflation, according to the TrueMark Investments CEO.

A secular growth stock that Loukas likes — Okta Inc.
OKTA,
+0.39%

— is in cybersecurity and has risen in Tuesday trading, he said. Shares of Okta were up 2.3% percent Tuesday afternoon, according to FactSet data, at last check.

Soaring inflation stems in large part from supply disruptions as demand soars with the reopening of the economy, but if prices pressures don’t ease in the near future it could put more stress on the U.S. recovery, some analysts fear.

Members of the Federal Reserve so far have insisted that inflation will wane soon once the U.S. and global economies regain a more normal footing, citing price pressures that have been mostly tied to temporary shortages that will fade away as supply catches up to demand.

See: Fed’s Daly says the strong June inflation reading was expected and higher prices won’t last

In other U.S. economic data Tuesday, the National Federation of Independent Business said its small-business index rose in June to the highest level in eight months. The index was up 2.9 points to 102.5 and topped 100 for the first time since November. It had fallen in May for the first time this year.

Stock-market investors were also seeking insights from the start of the second-quarter earnings reporting season.

Results from banking giants JPMorgan Chase & Co.
JPM,
-1.34%

and Goldman Sachs Group Inc.
GS,
-0.50%

came in early Tuesday, both topping forecasts.

JPMorgan Chase were lower after reporting profit that more than doubled but a fall in revenues. Goldman shares rose in early action after topping profit and revenue expectations and boosting its dividend by 60%, but subsequently turned south. Both banks are constituents of the Dow Jones Industrial Average.

Meanwhile, the president of the St. Louis Fed James Bullard said Tuesday the Federal Reserve should start reducing the stimulus it provides to the U.S. economy, though he added the reduction didn’t need to start immediately. “I think with the economy growing at 7% and the pandemic coming under better and better control, I think the time is right to pull back emergency measures,” he told the The Wall Street Journal in an interview published Tuesday.

Which companies are in focus?

The Centers for Disease Control and Prevention said it has received reports of 100 people who got the Johnson & Johnson JNJ shot developing Guillain-Barré syndrome, an immune system disorder that can cause muscle weakness and occasionally paralysis. Shares were down 0.1%.

Shares of Conagra Brands Inc.
CAG,
-4.73%

fell 4.6% after the food company warned of inflation pressure for the beginning of fiscal 2022. 

Shares of PepsiCo IncPEP were up 2.4% after the beverage and snacks company reported second-quarter profit and revenue that rose well above expectations and provided an upbeat full-year outlook.

Canadian cannabis company Organigram Holdings Inc. OGI posted a narrower loss for its fiscal third quarter than in the same period a year ago as revenue topped estimates. Shares were up 11.9%.

Altus Power Inc., the Connecticut-based clean electrification ecosystem company, is going public through a merger announced Tuesday with special-purpose acquisition company CBRE Acquisition Holdings Inc. CBAH, a deal that values the combined company at $1.58 billion. Shares of CBRE were up 1.8%.

 Boeing Co.
BA,
-3.19%

shares slid 3% after the aerospace giant said it has identified additional work that is required on its undelivered 787s, delaying their delivery through the rest of 2021.

What are other markets doing?

The yield on the 10-year Treasury note rose about 6 basis points to 1.429%.

The ICE U.S. Dollar Index
DXY,
+0.49%
,
a measure of the currency against a basket of six major rivals, was up 0.4%.

Oil futures edged higher, with the U.S. benchmark
CL00,
+1.43%

up 1.7%, while gold futures
GC00,
+0.10%

also ticked higher, rising 0.2%.

In European equities, the Stoxx 600 Europe
SXXP,
+0.03%

rose less than 0.1% to a record close. London’s FTSE 100
UKX,
-0.01%

fell less than 0.1%.

In Asia, the Hang Seng Index
HSI,
+1.63%

jumped 1.6% in Hong Kong, while the Shanghai Composite
SHCOMP,
+0.53%

and Japan’s Nikkei 225
NIK,
+0.52%

each advanced 0.5%.

—Mark DeCambre contributed to this report

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