By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock market closed lower,
dragged down by sharp declines in momentum stocks after the Federal
Reserve suggested valuations on biotech and Internet stocks may be
stretched.
A positive start early in the session on better-than-expected
results from J.P. Morgan Chase & Co. and Goldman Sachs Group
Inc. and generally positive economic data fizzled out when Fed
Chairwoman Janet Yellen began her two-day congressional
testimony.
The S&P 500 (SPX) recovered some of the losses, but closed
3.78 points, or 0.2%, lower at 1,973.32. The Dow Jones Industrial
Average (DJI) ended the day 5.3 points higher at 17,060.75, after
setting an intraday record in the morning. The Nasdaq Composite
(RIXF) dropped 24.03 points, or 0.5%, to 4,416.39. The Russell 2000
(RUT) fell 11.5 points, or 1%, to the preliminary 1,154.18.
The iShares Nasdaq Biotechnology ETF (IBB) was hit hard, falling
2.2%, while the Global X Social Media Index ETF (SOCL) gave up
1.1%.
Follow MarketWatch's live blog of today's stock-market
action.
"Investors are particularly interested to see proof that
earnings did bounce back in the second quarter. If we do not see
solid growth and positive outlook for the rest of the year, we
might see some repricing, as current multiples without growth are
not sustainable," said Drew Wilson, investment analyst at Fenimore
Asset Management
Federal Reserve Chairwoman Janet Yellen told Congress the Fed
could act sooner on interest rates if the labor market keeps
surprising. But, she added, that time is not yet here.
Yellen never mentioned the stock values of social media and
biotech companies in either her prepared remarks or answers to the
questions from the senators. That reference to valuations, which
hit the Nasdaq, was in a separate Fed monetary policy report
submitted to Congress along with Yellen's testimony.
Read: Live blog and video of Janet Yellen's appearance before
Senate.
Among the day's economic news, Empire State manufacturing
activity picked up in July to its highest reading in four years.
While retail sales in June rose less than expected, most stores
except for auto dealers and home-improvement outlets boasted an
improvement in revenue.
In earnings news, J.P. Morgan Chase (JPM) reported
better-than-expected earnings. Shares rose 3.5%. Read the recap of
the earnings call with analysts.
Goldman Sachs(GS) reported second-quarter earnings of $4.10 a
share and revenue of $9.13 billion, beating Wall Street estimates.
Goldman shares rose 1.3%. Recap: Goldman Sachs CFO says environment
mixed with historically low volatility levels.
As high-growth momentum stocks were hit, Tesla Motors, Inc.
(TSLA) shares dropped 3.1%, Twitter, Inc. (TWTR) and Facebook Inc.
(FB) fell 1.1%.
Yahoo Inc. (YHOO) shares rose over 3% in after-hours trade after
reporting second-quarter results that were in line with
expectations. Intel Corp. (INTC) also rose 3.4% after-hours,
following quarter reports. Read more about the day's notable movers
here.
Gold recovers, pound rallies
Asian markets did build on those gains, with the Nikkei 225
index settling at a more than one-week high. Gold(GCU4) fell for a
third session on Tuesday on the back of dovish comments from
Federal Reserve Chairwoman Janet Yellen. Crude oil futures(CLQ4)
futures succumbed to renewed selling pressure Tuesday, pushing the
U.S. benchmark back below $100 a barrel for the first time since
May.
The German ZEW economic-sentiment reading on Tuesday fell far
short of expectations, which weighed on Europe stocks and the euro
(EURUSD). The British pound(GBPUSD) rallied after U.K. inflation
inched closer to the Bank of England's 2% target.
More must-reads from MarketWatch:
Yellen: Fed may move sooner on rates if the labor market keeps
surprising
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