S&P 500 churns around the flatline as investors weigh inflation jump, start of earnings season

The S&P 500 churned Wednesday as investors digested fresh inflation data and third-quarter earnings reports.

The broad index traded near the flatline after fluctuating between gains and losses. The Dow Jones Industrial Average shed about 55 points, or 0.2%. The Nasdaq Composite ticked up 0.4%.

The consumer price index jumped 0.4% in September from the month prior and 5.4% year over year, the Labor Department reported Wednesday. Economists expected to see a month-to-month increase of 0.3% or annualized rate of 5.3%, according to Dow Jones.

“Much of these inflationary pressures are transitory, but that doesn’t stop them from having a dampening impact on activity. Today’s number, with food price inflation and shelter inflation moving higher, suggests growing pressure on consumers,” Seema Shah, chief strategist at Principal Global Investors said.

Excluding energy and food, the core CPI rose 0.2% month over month and 4% over the last 12 months, against respective estimates for 0.3% and 4%.

The Federal Open Market Committee will release the minutes from its September meeting at 2 p.m. on Wednesday. Investors will be looking for clues about timelines surrounding the central bank’s planned taper for its bond-buying program.

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Third-quarter earnings season kicked off on Wednesday with JPMorgan Chase, which said that quarterly profit topped expectations following a boost from better-than-expected loan losses. Revenue for the largest U.S. bank by assets also came in higher than expected.

JPMorgan shares fell more than 2% following the report despite the strong earnings report. The stock is up roughly 27% this year.

Delta Air Lines also reported financial results before the opening bell on Wednesday. The company posted higher-than-expected revenue and its first quarterly profit without counting federal aid since the start of the pandemic.

However, the airline said higher costs of fuel and other expenses will pressure its fourth-quarter bottom line. Shares of Delta shed more than 5%.

“We’re at that point where valuations … stopped going up and, in fact, are coming down, while earnings growth is peaking,” Jurrien Timmer, director of global macro at Fidelity Investments, said on CNBC’s “Squawk on the Street.” “That creates a less upward trajectory for the stock market.”

Apple shares dipped around 1% after a Bloomberg News report that said it is likely to cut iPhone 13 production because of chip shortages.

Despite Apple’s retreat, technology stocks enjoyed a lift Wednesday from lower U.S. 10-year Treasury note yield. Low interest rates can push growth stock prices higher because they lift the value of companies’ future earnings. Investors tend to reach toward those high-margin technology shares when interest rates are low.

A relatively strong tech sector helped support the Nasdaq Composite and S&P 500. Big Tech names Microsoft, Google-parent Alphabet and Amazon rose slightly. Nvidia, Zoom and Salesforce also gained.

Investors are awaiting earnings reports from Bank of America, Morgan Stanley, Citigroup, Wells Fargo and Walgreens Boots Alliance on Thursday.

“This clearly represents the first quarter of real EPS risk that investors have had to deal with in the COVID recovery, as GDP estimates have collapsed since mid-August on nothing short of historic supply chain issues,” said Tavis McCourt, institutional equity strategist at Raymond James.

“However, consensus EPS at the index level has not changed meaningfully, as, remarkably, a greater number of stocks have seen positive earnings revisions since mid-August than negative,” McCourt added.

— with reporting from CNBC’s Patti Domm.

(With Inputs from cnbc)

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