By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- Momentum stocks dropped after the
Federal Reserve suggested valuations on biotech and Internet stocks
may be stretched, dragging down the broader market.
Stocks had risen 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.
By early afternoon, the S&P 500 (SPX) fell 9 points, or
0.4%, to 1,968.351. The Dow Jones Industrial Average (DJI) shed 32
points, or 0.2%, to 17,023.94, after setting an intraday record in
the morning. The Nasdaq Composite (RIXF) dropped 39 points, or
0.8%, to 4,400.50. The Russell 2000 (RUT) fell 15 points, or 1.3%,
to 1,150.29.
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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 3.8%. 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 0.8%. Recap: Goldman Sachs CFO says environment
mixed with historically low volatility levels.
Yahoo Inc. (YHOO) and Intel Corp. (INTC) are both due to report
after the close. 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) dropped
building on Monday's heavy losses. Oil(CLQ4) was pushing lower.
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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