Stocks in the U.S. traded sideways this week as investors digested corporate earnings and higher than anticipated inflation data. The big banks kicked off the second-quarter earnings season this week with mixed results. JPMorgan (JPM) and Goldman Sachs (GS) were the first to release their second-quarter results, both surpassing analyst expectations. Despite the earnings beats, the sector sold off over concerns that many of the bank’s catalysts for earnings may be starting to wane as the coronavirus pandemic subsides.
On the data front, the consumer price index (CPI) rose in June by the most since 2008, topping consensus estimates and fueling inflationary pressures as the economy continues to recover. CPI rose 0.9% for June, and 5.4% year-over-year, well above expectations. That said, many of the largest contributors were “transitory” items like used cars and trucks, which increased by 10.5% in June. On the policy front, Federal Reserve Chairman Jerome Powell released prepared remarks on Wednesday ahead of his mandated semiannual testimony to Congress regarding the state of monetary policy and the economy. To note, Powell said that the economy is “a ways off” from where it needs to be for the central bank to change monetary policy and reiterated the central bank’s belief that rising inflation is largely a result of temporary factors.
Submitted by: Austin Schaul, Head of Research
Source: GSAM, CNBC, MFS, Factor Investor

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