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The financial markets ended narrowly mixed Tuesday, with blue-chips leading a recovery from declines ignited by the Federal Reserve Tuesday suggesting valuations for so-called momentum stocks may be "substantially stretched," sending shares of biotech and social media companies skidding.
Financial stocks helped erase those fears after J P Morgan (NYSE:JPM) and the Goldman Sachs (NYSE:GS) posted better-than-expected Q2 results. Consumer stocks fell after retail sales growth last month trailed market expectations while shares of commodity-related stocks fell as Crude Oil futures slipped under $100 per barrel for the first time in two months and Gold again fell under $1,300 per ounce.
In its biannual report accompanying Fed Chair Janet Yellen's testimony today before the Senate Banking Committee, the central bank wrote, "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."
The NASDAQ Biotechnology Index fell as much as 2.7% % and the NYSE ARCA Biotechnology dropped over 2.8% Tuesday before trimming a portion of those losses as the session continued. The NASDAQ Internet Index was down about 1.5% at its intra-day low, finishing with a 0.6% decline.
Consumer stocks also floundered after the Commerce Department reported just a 0.2% rise in U.S. retail sales during June from the prior month, lagging the market consensus looking for a 0.6% rise. A big drop in sales at building and garden supply stores kept a lid on consumer purchases, with restaurant sales and car buying also declining from May levels.
And after more than two weeks of falling prices for Crude Oil, the August West Texas Intermediate contract settled $1.13 lower at $99.86 -- the first time the benchmark contract broke the $100 threshold since May 12 as supply worries waned when Libyan oil officials said production from its Sharara field has climbed to 554,000 barrels daily.
Other commodity futures also fell. August Natural Gas fell 5 cents to finish at $4.10 per 1 million BTU. August Gold declined $9.50 to $1,297.20 per ounce while September Silver dropped 3 cents to $20.89 per ounce. September Copper was unchanged at $3.25 per pound.
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