By Stan Choe
Wall Street is drifting Tuesday following some mixed reports on the economy and corporate profits.
The S&P 500 was edging up by 0.1% in early trading. The Dow Jones Industrial Average was up 125 points, or 0.4%, at 34,710, as of 9:45 a.m. Eastern time, and the Nasdaq composite was 0.4% lower.
Charles Schwab jumped 12.9% after reporting stronger profit and revenue for the spring than analysts expected. Several other financial giants also reported stronger results than expected for the latest quarter, including Bank of America and Morgan Stanley.
PNC Financial Services Group was swinging between losses and gains after it reported weaker revenue than forecast, though its profit topped expectations. It was most recently up 0.2%. Prologis, an owner of warehouses and other logistics real estate, fell 3.2% after also reporting weaker revenue than expected.
The reporting season is just ramping up as companies tell investors how much profit they earned from April through June. Banks have been at the front of the parade, which JPMorgan Chase helped begin last week with a better-than-expected report. Banks can offer a unique window into the economy’s strength because of how many different types of customers they serve.
“We continue to see a healthy U.S. economy that is growing at a slower pace, with a resilient job market,” Bank of America CEO Brian Moynihan said while reporting results for the nation’s second-largest bank.
PNC, meanwhile, said its baseline outlook is for a mild recession to start in late 2023 or early 2024, lasting into the middle of next year.
Such statements get at one of the biggest questions setting Wall Street’s agenda: whether the economy can avoid a long-predicted recession and outlast high inflation, which has forced the Federal Reserve to crank up interest rates.
Reports on the economy Tuesday came in mixed. One said that sales at U.S. retailers grew by less last month than economists expected, marking a slowdown from May’s growth. That could indicate a tiring consumer, whose strong spending has so far been one of the main bulwarks keeping the economy out of a recession.
But economists said underlying sales trends, which exclude automobiles, gasoline and other items, were stronger than expected in June.
A separate report said U.S. industrial production contracted again last month. That was a surprise to economists, who had been forecasting a flat reading.
Altogether the data seemed to reinforce the heavy bet among traders that the Federal Reserve will raise its federal funds rate at its meeting next week, but that could be the final hike of this cycle.
High rates undercut inflation by bluntly slowing the entire economy and dragging downward on prices for stocks and other investments.
If the Fed does follows through on expectations next week and raises the federal funds rate to a range of 5.25% to 5.50%, it will be at its highest level since 2001. That would be a mammoth increase from its record low of nearly zero early last year.
But inflation has been slowing over the last year, and hopes are high on Wall Street that it will continue cooling enough to get the Fed to stop raising rates and perhaps begin cutting them next year.
Treasury yields bounced around following the economic reports but remained below where they were a day before.
The yield on the 10-year Treasury fell to 3.77% from 3.81% late Monday. It helps set rates for mortgages and other important loans.
The two-year Treasury yield, which moves more on expectations for the Fed, fell to 4.70% from 4.75%.
In markets abroad, stocks were moving modestly in Europe and mixed in Asia. Hong Kong's Hang Seng tumbled 2.1%, while Japan's Nikkei 225 added 0.3%.
AP Business Writers Yuri Kageyama and Matt Ott contributed.