S&P 500, Nasdaq fall on tech selloff, mixed bank earnings

The S&P 500 and Nasdaq indexes fell in choppy trading on Tuesday as investors digested a mixed bag of quarterly earnings reports from US lenders, with new business restrictions in California weighing on technology stocks.

Largest US lender JPMorgan Chase & Co rose 2.2% as it posted a smaller-than-expected 51% drop in second-quarter profit and set aside $10.5 billion to cover potential bad loans.

However, Wells Fargo & Co tumbled 5.8% after it posted a quarterly loss for the first time since the 2008 financial crisis. Citigroup Inc was also down 0.8% as it reported a steep drop in quarterly profit.

The losses in bank shares pushed the S&P 500 banks index down 0.9%.

"We're clearly in for more volatility as earnings season is now beginning, and these increases in the virus in California, Texas, Tennessee and Florida are going to continue to keep people on edge," said Randy Frederick, vice president of trading and derivatives at Charles Schwab in Austin, Texas.

Wall Street has reclaimed most of its coronavirus-driven losses since March as a raft of monetary and fiscal stimulus and improving economic data raised hopes of a swift post-pandemic recovery.

But a recent record surge in COVID-19 cases and new business restrictions, particularly in California, have sparked a selloff in tech stocks, with the Nasdaq pulling back from record highs.

Technology stocks shed another 1%, leading losses among major S&P sectors.

Wall Street's fear gauge rose for a second straight day to its highest in two weeks.

Investors are bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the 2008 financial crisis, according to Refinitiv IBES data.

"Expectations are so low that there's a good chance there will be a decent set of earnings reports over the next two or three weeks," said Christopher Grisanti, chief equity strategist at MAI Capital Management in Cleveland, Ohio.

Meanwhile, the United States on Monday rejected China's disputed claims to offshore resources in most of the South China Sea. The Trump administration also plans to scrap a 2013 auditing agreement that could foreshadow a broader crackdown on US-listed Chinese firms.

At 10:00 a.m. ET, the Dow Jones Industrial Average was up 89.57 points, or 0.34%, at 26,175.37, the S&P 500 was down 9.80 points, or 0.31%, at 3,145.42. The Nasdaq Composite was down 98.43 points, or 0.95%, at 10,292.41.

Delta Air Lines Inc fell 1.2% as it warned it will be more than two years before the industry sees a sustainable recovery from the "staggering" impact of the coronavirus pandemic, with demand largely tracking the curve of infections in different places.

Data on Tuesday showed US consumer prices rebounded in June after three straight monthly declines, but the underlying trend suggested inflation would remain muted.

Declining issues outnumbered advancers for a 1.02-to-1 ratio on the NYSE and for a 1.50-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and no new low, while the Nasdaq recorded 18 new highs and 18 new lows.