The stock markets in the United States fluctuate after the Federal Reserve indicated that sectors have excessive valuations. Investors are evaluating the comment of the central bank compared with the better-than-expected earnings of banks and economic data, according to Bloomberg.

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The S&P 500 and the NASDAQ declined while the Dow Jones Industrial Average (DJIA) slightly gained by the end of the trading session today.

Federal Reserve stated in a report, “Valuation metrics in some sectors do appear substantially stretched, particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.”

Separately, Federal Reserve Chairperson said, “a high degree of monetary policy accommodation remains appropriate” during her semi-annual report to the Senate Banking Committee today. Yellen added that the economic recovery is not yet complete, and policy makers need to be careful and ensure that the economy is on a solid trajectory before considering the idea of increasing interest rates.

In reaction to the statement of the Yellen and the report of the Federal Reserve regarding overvaluation in some sectors, Walter “Bucky” Hellwig, senior vice president of BB&T Wealth Management said, “There was a short-term reaction to that comment and the markets pretty much digested it. What it did is throw some cold water on some of the better earnings reports that were out earlier and had the markets on a roll.”

Hellwig added, “For a long side investor, it was disappointing that she had to use those terms specifically.”

On the other hand, Eric Teal, chief investment officer at First Citizens BancShares said, “The Fed wants to pay attention to valuations given that they might have to change the interest rate backdrop that has been a strong catalyst for the market.”

U.S. Markets

  • Dow Jones Industrial Average (DJIA)- 17,060.68 (+0.03%)
  • S&P 500- 1,973.28 (-0.19%)
  • NASDAQ- 4,416.39 (-0.54%)
  • Russell 2000- 1,153.71 (-1.02 %)

European Markets

  • EURO STOXX 50 Price EUR- 3,153.75 (+1.01%)
  • FTSE 100 Index- 6,710.45 (-0.53%)
  • Deutsche Borse AG German Stock Index DAX- 9,719.41 (-0.65%)

Asia-Pacific Markets

  • Nikkei 225- 15,395.16 (+0.64%)
  • Hong Kong Hang Seng Index- 23,459.96 (+0.49%)
  • Shanghai Shenzhen CSI 300 Index- 2,174.98 (+0.15%)

Stocks in Focus

The stock price of JPMorgan Chase & Co. (NYSE:JPM) gained 3.52% to $58.27 per share after the bank reported earnings of $1.46 per share for the second quarter. Its performance is down by 9% compared with its earnings of $1.60 per share in the same period a year earlier, but it exceeded the consensus estimate of Wall Street analyst at $1.29 per share.

The shares of Goldman Sachs Group Inc (NYSE:GS) rose 1.30% to $169.17 per share after reporting second-quarter earnings that beat consensus estimates. The bank delivered earnings of $4.1o per share and $9.3 billion in revenue. Analysts estimated for the bank to report earnings of $3.09 per share and $7.98 billion in revenue.

Lorillard Inc. (NYSE:LO) declined 10.49% to $60.17 per share after Reynolds American, Inc. (NYSE:RAI) agreed to acquire its smaller rival for $27.4 billion in cash and stock. British American Tobacco PLC (ADR) (NYSEMKT:BTI) will keep its 42% stake in Reynolds. The of Reynolds dropped 6.87% to $58.84 per share while the stock value of British American fell 1.88% to $120.61 per share today.