Financial firms nudged the S&P 500 to a fresh record Tuesday, a rare day lately when a sector other than technology led the broad stock index higher.
Shares of Goldman Sachs Group and Intercontinental Exchange ended the session at all-time highs, while another six banks and finance companies in the S&P 500 closed at their highest price in at least a year. JPMorgan, Citigroup, and Bank of America are among the big firms scheduled to disclose spring-quarter earnings on Friday.
The S&P 500 gained less than 0.1% to set its 36th new record this year. The tech-heavy Nasdaq Composite added a little more than 0.1%, to also notch a new all-time high. The Dow Jones Industrial Average declined 0.1%, or about 53 points.
Tuesday started out as another day with chip makers and other firms with an angle on the artificial-intelligence boom leading the way. Technology stocks turned lower, while Treasury yields and shares of banks rose following Federal Reserve Chairman Jerome Powell’s midmorning remarks to Congress.
Powell told the Senate Banking Committee that recent employment data suggest the labor market has “cooled considerably.” He said the central bank is weighing the potential that high rates wreck the economy and cause excessive unemployment against the risk of reigniting inflation with rates cut too soon.
Lindsay Rosner, head of multisector investing at Goldman Sachs Asset Management, said the Fed has successfully brought inflation down toward its targeted levels without too much damage to the economy. She said the central bank will likely cut rates in September, as the market has priced in.
“It is absolutely a soft landing,” she said. “That may not have been something thought possible by many market participants in the beginning of the year, but as the data has come through that is absolutely what we’re seeing.”
Treasury yields rose following Powell’s remarks but eased in afternoon trading. The yield on benchmark 10-year notes ended Tuesday at 4.297%, up from 4.267% on Monday. Yields rise as prices fall.
Investors and central bankers will get the next read on inflation Thursday when the Labor Department is scheduled to publish consumer prices for June. On Friday, they will begin to get a look at how America’s biggest companies fared during the spring quarter when earnings season kicks off with financial reports from big banks.
Bank of America Securities analysts said they expect the second quarter to be the first since 2022’s fourth quarter in which earnings per share grow for the companies in the S&P 500 outside of the so-called Magnificent Seven tech firms driving this year’s rally.
“Growth is broadening out and so should the market,” they wrote in a note to clients.
When and if the so-called Other 493 join the top-heavy rally has become a key focus for money managers.
“It’s extremely unsettling that markets continue to make new highs while the average stock is languishing,” said Hans Olsen, chief investment officer at Fiduciary Trust. “That is not a sign of a healthy market nor a market that can durably move higher without some sort of correction.”
U.S.-listed shares of BP shed 4.8% after the British energy giant warned that weak oil trading and lower refining margins would hurt earnings and that it would book an impairment of up to $2 billion for the second quarter.
Railroad CSX lost 2.7% after Wall Street analysts trimmed earnings estimates. “Rail volumes continue to track below pre-Covid levels,” analysts with TD Cowen wrote in a note to clients.
Overseas, stock indexes were mixed. Japan’s Nikkei 225 closed 2% higher at a new record. China’s Shanghai Composite added 1.3%. France’s CAC and Germany’s Dax shed 1.6% and 1.3%, respectively.