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Midday Market Update: Stocks Mixed, Sentiment Weak

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Stocks were mixed by midday Wednesday and overall risk sentiment was notably weak. Investors were weighing bank earnings and economic data.

The S&P 500 fell 0.8%, dragged lower by large cap tech stocks like some FAANG’s and semiconductors. The tech-heavy Nasdaq fell more than 1%. The 10-Year Treasury yield fell to 0.71% from 0.73%. Yields fall when prices rise.

Bank of America  (BAC) - Get Free Report missed revenue estimates by a few hundred million dollars, posting a result of about $20 billion. It beat earnings per share estimates (51 cents vs. 49 cents). Loan loss provisions were about $1 billion, down from $5 billion last quarter, indicating, as expected, the positive direction in consumer and business credit.

Still, like other banks, the stock fell even after a fairly solid earnings report. The yield curve has been compressing and bank analysts note that bank stocks cannot gain momentum until loan demand and interest rates pick up. Bank of America fell more than 3%. Shares of investment banks were holding in stronger, as capital markets and deal-making revenues are providing a significant offset to poor lending revenue.

Many economically-sensitive stocks like consumer discretionary were down a few tenths of a percentage point after having been up a smidgen. Advancing stocks by noon were outpacing decliners by a 3 to 2 ratio.The reason cyclicals are not getting a jolt from slight economic positives located in banks earnings: uncertainty over more fiscal stimulus and the timing of multiple vaccines are making investors nervous that the pace of the economic recovery will slow down.

Materials and industrials were up as much as over 1%. The producer price index showed an increase of 0.4% for the past month, beating estimates of 0.2%. That’s backward looking data, weighed against the shaky forward-looking picture, although investors have chosen to focus on the data rolling in for these stocks. 

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