Stocks wobble as investors digest earnings, inflation risks

Stocks wobbled in afternoon trading as investors weighed the latest corporate earning reports and the Federal Reserve’s chair’s comments on inflation.

Investors had a mixed reaction to a new batch of earnings news from banks, airlines and other companies, as well as the latest report showing another rise in inflation. The major indexes have been swaying between gains and losses throughout the day.

Wall Street is closely watching the latest round of earnings for confirmation about the scale and pace of the economic recovery as people return to work, travel again and generally try to get back to some semblance of normal following the worst of the virus pandemic.

The S&P 500 was up 0.3% as of 2:20 p.m. Eastern, on pace to reverse most of its pullback from a day earlier. The Dow Jones Industrial Average rose 61 points, or 0.2%, to 34,951 and the Nasdaq inched 0.1% higher. Small-company stocks continued to lag the rest of the market. The Russell 2000 index fell 1.1%.

Energy companies had some of the biggest losses, partly due to a 2.9% drop in the price of benchmark U.S. crude oil. Occidental Petroleum fell 6% for the biggest drop in the S&P 500, while Cabot Oil & Gas slid 3.4%.

Technology stocks were higher, led by a 2.6% gain in Apple following a published report that the consumer electronics giant planned to increase production of iPhones.

Long-term bond yields were mostly lower. The yield on the 10-year Treasury note fell to 1.36% from 1.41% late Tuesday.

Banks were mostly lower even after several of them turned in solid earnings reports.

Citigroup gave up an early gain and fell 1.1%, despite reporting a more than five-fold rise in profits, helped by an improving economy that resulted in fewer bad loans on the bank’s balance sheet. Wells Fargo rose 3.5% for the biggest gain in the S&P 500 after reporting its most profitable quarter in two years.

Mixed results from Bank of America disappointed investors. It fell 3.6% after reporting solid profits, but weak revenue.

Airlines showed more signs of recovery as people begin to resume travel for work and leisure. American Airlines jumped 3.3% after giving investors an encouraging update on its second-quarter financial picture.

Outside of earnings, investors are still closely watching measures of inflation to better gauge how it could impact the recovery. Inflation at the wholesale level jumped 1% in June, pushing price gains over the past 12 months up by a record 7.3%. The news on wholesale prices followed a report Tuesday that consumer prices increased in June by 0.9% and were up 5.4% over the past 12 months, the biggest 12-month gain in 13 years.

Federal Reserve Chair Jerome Powell suggested in testimony to a House committee that inflation will likely remain elevated, but eventually moderate, reinforcing the central bank’s position that rising inflation is a temporary impact from the recovering economy. A key concern for investors has been how quickly the Fed will shift its interest rate policies in the face of rising inflation, but it has signaled there is no imminent change coming.