US stocks edge higher as investors weigh earnings, inflation

Stocks edged higher in afternoon trading Tuesday as investors weigh the latest quarterly earnings reports from big U.S. companies and concerns about inflation.

Inflation has been a lingering concern for the markets as investors try to gauge how it will impact everything from the economic recovery's trajectory to the Federal Reserve's reaction. The latest report from the Labor Department shows yet another increase in consumer prices in June that surprised economists.

The S&P 500 rose 0.2% as of 12:01 p.m. Eastern. The Dow Jones Industrial Average fell 16 points, or 0.1%, to 34,979 points and the Nasdaq rose 0.5%.

Most stocks within the benchmark S&P 500 were losing ground, but technology companies made solid gains and helped counter the broader drop. The muted trading comes a day after the index set its latest record high.

Prices for U.S. consumers jumped in June by the most in 13 years, extending a run of higher inflation that has been raising concerns on Wall Street that the Fed might consider withdrawing its low-interest rate policies and scaling back its bond purchases earlier than expected.

Much of the increase in prices for goods, such as used cars, is mostly tied to a surge in demand and lack of supply. But prices for many items, like lumber and other raw materials, either is easing or will ease as suppliers continue to ramp up operations, said Jamie Cox, managing partner at Harris Financial Group.

“That’s a problem and it shows up in all kinds of places but it’s not going to be there forever,” Cox said.

Major companies opened up the latest round of corporate earnings with investors listening closely for clues about how companies have fared during the recovery and how they see the rest of the year unfolding.

Goldman Sachs slipped 1% despite reporting the second-best quarterly profit in the investment bank's history. JPMorgan Chase fell 2.4% after giving investors a mixed report with solid profits but lower revenue as interest rates fell over the last three months.

Banks were the biggest drag on the market. Bond yields, which they rely on to charge more lucrative interest rates on loans, have been falling for months after a spike earlier in the year. The yield on the 10-year Treasury was unchanged at 1.36% from late Monday.

The calmer bond market is partly signaling more confidence that rising inflation will likely be temporary and tied mostly to the economic recovery.

“That narrative is pretty well anchored and the bond market doesn’t fear the Fed tapering or raising rates,” Cox said.

Solid earnings did help some companies make gains. PepsiCo rose 2.5% after beating Wall Street's second-quarter profit and revenue forecasts.

Boeing fell 3.3% after announcing production cuts for its large 787 airliner because of a new structural flaw in some planes that have been built but not delivered to airline customers.