Week 30 in Brief
U.S. stock indexes closed lower Friday, posting a weekly loss to close out the month, with renewed concerns about a rise of cases of the delta variant COVID-19 and disappointing results from Amazon partly blamed for the slump.
How did the major indices perform?
- On Friday, the Dow Jones Industrial Average fell 149.06 points, or 0.4%, to 34,935.47.
- The S&P 500 fell 23.89 points, or 0.5%, to 4,395.26.
- The Nasdaq Composite fell 105.59 points, or 0.7%, to 14,672.68.
- The Russell 2000 index of smaller companies fell 13.78 points, or 0.6%, to 2,226.25.
- For the week: The S&P 500 is down 16.53 points, or 0.4%., the Dow is down 126.08 points, or 0.4%., the Nasdaq is down 164.31 points, or 1.1%, while the Russell 2000 is up 16.60 points, or 0.8%.
- For the year: the S&P 500 is up 639.19 points, or 17%., the Dow is up 4,328.99 points, or 14.1%., the Nasdaq is up 1,784.40 points, or 13.8%., while the Russell 2000 is up 251.39 points, or 12.7%.
What drove the market?
- U.S. stocks fell in the final day and week of trading in July, weighed down by worries over Covid-19 and a slide in Amazon.com shares after the technology giant’s miss on sales expectations. The pullback on Wall Street took shape after stock-market selling in Asia capped a withering week. Hong Kong’s Hang Seng marked its worst weekly decline since February and its steepest monthly drop since October of 2018, FactSet data show.
- Coronavirus worries. Some analysts pointed to fresh worries about the delta variant as an internal document from the Centers for Disease Control and Prevention indicated increasing official concern over the spread of the variant. First reported by The Washington Post, the data said the variant may be as easily spread from vaccinated and unvaccinated individuals and was as “transmissible as chickenpox.”
- Corporate earnings: Technology stocks contributed to the drop in U.S. stocks, with Amazon shares closing 7.6% lower after second-quarter results showed a miss on sales and a forecast for the third quarter, suggesting a slowdown in e-commerce activity is set to continue. More than half of companies in the S&P 500 index have now reported second-quarter earnings, with investors digesting that data along with the guidance and commentary from management as they wrapped up a final day of trading for the month.
- Economic data: Data showed that inflation in the U.S. rose sharply again in June, as gauged by the so-called PCE price index, the Federal Reserve’s preferred measure of pricing pressures, which rose a sharp 0.5% for the month and 4% for the year. The increase over the past year remained at a 13-year high, raising the cost of living for consumers and casting a shadow over a strong economic recovery from COVID-19. The surge in prices is largely tied to the reopening of businesses and widespread shortages of supplies and labor spawned by the pandemic.
- The U.S. GDP grew at an annualized pace of 6.5% in the second quarter, falling short of the average forecast of 9.1% produced by a survey of economists by The Wall Street Journal. Separately, data from the Labor Department showed first-time applications for unemployment benefits fell 24,000 last week to 400,000. A final reading of the University of Michigan’s consumer-sentiment index fell to 81.2 in July from a reading of 85.5 in June, though it exceeded the initial July figure of 80.8. Economists had expected a reading of 80.5, according to a Wall Street Journal survey.
Which stocks were in focus Friday?
- Amazon late Thursday reported second-quarter earnings of $7.78 billion, or $15.12 a share, up from $10.30 a share a year ago, when shelter-in-place requirements from the COVID-19 pandemic began and led to big uptakes in e-commerce. Sales grew to $113.1 billion from $88.9 billion a year ago, missing expectations as sales that had been growing more than 40% in recent quarters fell to a growth of 27%. Shares closed 7.6% lower Friday.
- Shares of Robinhood Markets Inc. rose 1%. The stock of the newly public, no-fee trading app debuted on Thursday at $38.00.
- Shares of Exxon Mobil Corp. fell 2.3% after the oil giant swung to the highest second-quarter profit since the end of 2019 as revenue more than doubled to well above forecasts.
- Shares of Chevron Corp. fell 0.7% after the oil giant swung to a second-quarter profit and reported revenue that beat expectations, with free cash flow reaching the highest in two years.
- Shares of Procter & Gamble increased 2% after the consumer products giant reported fiscal fourth-quarter profit and sales that rose above expectations, with the strongest growth in its healthcare and beauty businesses.
- Shares of Caterpillar Inc. dropped 2.7% after the construction and mining equipment company reported a second-quarter net profit that tripled and revenue that topped forecasts, even as the largest construction business came up short.
- Capri Holdings Ltd. shares rose 12.5% after the luxury company, and parent of Michael Kors reported fiscal first-quarter earnings that blew past expectations and gave guidance ahead of consensus.
- Blooming’ Brands Inc. shares fell 0.2% even as the parent of Outback Steakhouse beat consensus estimates for the second quarter and offered upbeat guidance.
- VF Corp. represented by brands Vans, The North Face, and Timberland, reported fiscal first-quarter net income of $324.2 million, or 82 cents per share, after a loss of $285.6 million, or 73 cents per share, last year. Shares fell 5.1%.
How did the European markets perform?
- European stocks fell from record highs on Friday as concerns about the fast-spreading Delta variant and regulatory actions in China outweighed optimism around the quarterly earnings season and economic recovery.
- The pan-European STOXX 600 index fell 0.5%, but rose for a sixth straight month in July, its longest winning streak since 2012-13 when it rose for 12 months in a row.
- Travel and leisure stocks and miners were the top decliners. British Airways owner IAG fell 7.5% after it said summer capacity would rise to 45% of pre-pandemic levels but warned that significant uncertainty remained.
- Out of half the STOXX 600 companies that have reported so far, 67% have topped analysts’ profit estimates, according to Refinitiv IBES data. While that is below the 72% beat rate in the first quarter, it still tops the 51% rate in a typical quarter.
- The eurozone economy grew more strongly than expected in the second quarter as the bloc rebounded from a recession caused by the COVID-19 pandemic, preliminary data showed.
How did Asian markets perform?
- In Asia, Hong Kong’s Hang Seng closed 1.4% lower and booked a nearly 5% loss for the week. The index ended down nearly 10% in July. The Shanghai Composite finished down 0.4% and logged a 4.3% weekly slump and fell 5.4% for the month.
- Meanwhile, Japan’s Nikkei 225 declined 1.8% overnight in Asia, falling 1% for the week and 5.2% for the month. The China CSI 300 closed 0.8% for the day, 5.5% for the week and booked a nearly 8% monthly decline.
Commodities and Bonds
- In commodities markets, oil prices fell back after global benchmark Brent on Thursday topped $76 a barrel on tight U.S. supplies.
- Brent was down 0.24% at $75.87 per barrel and U.S. West Texas Intermediate crude traded down 0.29% at $73.41. Brent crude is still up nearly 2% for the week.
- Spot gold was unchanged at $1,827.9 an ounce, on course for its best week in more than two months on the prospect of delayed Fed tapering.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was up 0.3%.
- The dollar index was last down 0.1% at 91.809, with the euro up 0.2% at $1.1905. The greenback was 0.1% higher against the yen at 109.55.
- The earning seasons continue with nearly one-third of companies in the Russell 3000, including Uber and DraftKings reporting.
- Investors will digest manufacturing, industrial production, and jobs data from across the world.