Wall Street Mixed; Earning Season Gears Up

NEW YORK (AP) -- Wall Street is drifting Tuesday following some mixed reports on the economy and corporate profits.

The S&P 500 was 0.2% higher in morning trading, with the majority of the stocks in the index on the upswing. The Dow Jones Industrial Average was up 237 points, or 0.7%, at 34,823, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.

Charles Schwab jumped 11.7% after reporting stronger profit and revenue for the spring than analysts expected. Several other financial giants also reported stronger results than forecast for the latest quarter, including Bank of America and Morgan Stanley.

On the losing end was Masimo, which makes medical sensors and patient monitors and also runs a consumer audio business home to the Bowers & Wilkins and Denon brands. It tumbled 21.8% after it said it expects to report weaker-than-expected revenue for the spring in part because of fewer patients at U.S. hospitals. It also said a decline in demand for audio products has moved up from lower-end consumers to the premium and luxury end.

Wall Street's reporting season is just ramping up as companies tell investors how much profit they earned from April through June. Banks have been at the front of the parade, which JPMorgan Chase helped begin last week with a better-than-expected report. Banks can offer a unique window into the economy's strength because of how many different types of customers they serve.

"We continue to see a healthy U.S. economy that is growing at a slower pace, with a resilient job market," Bank of America CEO Brian Moynihan said while reporting results for the nation's second-largest bank. Its stock rose 3.9%.

PNC Financial Services Group, meanwhile, said its baseline outlook is for a mild recession to start in late 2023 or early 2024, lasting into the middle of next year. It also reported stronger profit for the latest quarter than expected, though its revenue fell short of forecasts. Its stock rose 1.8%.

Such statements get at the biggest question setting Wall Street's agenda: whether the economy can avoid a long-predicted recession and outlast high inflation, which has forced the Federal Reserve to crank up interest rates.

Reports on the economy Tuesday came in mixed. One said that sales at U.S. retailers grew by less last month than economists expected, marking a slowdown from May's growth. That could indicate a tiring consumer, whose strong spending has so far been one of the main bulwarks keeping the economy out of a recession.

But economists said underlying sales trends, which exclude automobiles, gasoline and other items, were stronger than expected in June.

A separate report said U.S. industrial production contracted again last month. That was a surprise to economists, who had been forecasting a flat reading.

Altogether the data seemed to reinforce the heavy bet among traders that the Federal Reserve will raise its federal funds rate at its meeting next week, but that could be the final hike of this cycle.

High rates undercut inflation by bluntly slowing the entire economy and dragging downward on prices for stocks and other investments.

If the Fed does follows through on expectations next week and raises the federal funds rate to a range of 5.25% to 5.50%, it will be at its highest level since 2001. That would be a mammoth increase from its record low of nearly zero early last year.

But inflation has been slowing over the last year, and hopes are high on Wall Street that it will continue cooling enough to get the Fed to stop raising rates and perhaps begin cutting them next year.

Treasury yields bounced around following the economic reports but remained below where they were a day before.

The yield on the 10-year Treasury fell to 3.75% from 3.81% late Monday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield, which moves more on expectations for the Fed, fell to 4.70% from 4.75%.

In markets abroad, stocks were rising modestly in Europe and mixed in Asia. Hong Kong's Hang Seng tumbled 2.1%, while Japan's Nikkei 225 added 0.3%.