US stocks close lower, ending a three-week winning streak, amid weaker consumer confidence

US stocks fell on Friday to end the week lower, ending a three-week winning streak for major indices, as data showing declining consumer confidence overshadowed a previous report of a sharp increase retail sales, while corporate earnings reports remained mixed.

Federal Reserve Chairman Jerome Powell reassured markets this week that a rise in inflation was likely to be temporary, but higher prices could be the cause of the drop in confidence of consumers.

How Do Stock Indices Trade?
  • The Dow Jones Industrial Average DJIA,
    lost 299.17 points, or 0.9%, to 34,687.85.

  • The S&P 500 SPX index,
    fell 32.87 points to 4,327.16, a decrease of 0.8% weighed down by a 2.8% drop in the energy sector SP500.10,
    and a 1.3% in financials SP500.40,

  • The Nasdaq COMP Composite Index,
    fell 115.90 points, or 0.8%, to 14,427.24.

On Thursday, the Dow Jones index rose 53.79 points or 0.15% today to 34,987.02, the S&P 500 fell 14.27 points, or 0.33%, to 4,360.03 , while the Nasdaq Composite Index closed down 101.82 points, or 0.70%, at 14,543.13.

For the week, all three major US stock indexes fell, ending their three straight weeks of wins. The Dow Jones saw a weekly decline of 0.5%, while the S&P 500 recorded a weekly loss of 1% and the Nasdaq fell 1.9% for the week. The Russell 2000 RUT Small Cap Index,
fell 5.1% for the week in their third consecutive weekly loss.

What drove the market?

A strong start to second quarter earnings reports and strong retail sales in June were overshadowed on Friday by evidence of declining consumer confidence, analysts said.

“The sharp drop in consumer sentiment appears to be dominating strong earnings and rising retail sales,” wrote Mike Loewengart, managing director of investment strategy at E-Trade Financial, in comments emailed to MarketWatch .

A preliminary reading from the University of Michigan’s Consumer Confidence Index fell to 80.8 in July from a final reading of 85.5 in June, reaching the measure’s lowest level since February. Economists were expecting a reading of 86.3 according to a Wall Street Journal poll.

The survey shows that consumers are bracing for a 4.8% increase in the cost of living this year, the highest level since 2008.

“Inflation has put additional pressure on living standards, especially on low and middle income households, and has caused the postponement of large discretionary purchases, especially among high income households,” Richard said. Curtin, chief economist of the University of Michigan survey.

Meanwhile, sales by US retailers rose 0.6% last month, against a forecast of 0.4% decline. Excluding automobiles, retail sales rose 1.3%, nearly three times more than Wall Street expected.

“The economy is pretty strong,” said James Solloway, chief market strategist and senior portfolio manager at SEI Investments Co., in a telephone interview on Friday. “Consumers are finally out of the house. “

People are taking more vacations and going to restaurants, he said, “shifting their purchases to services” while also turning to buying products in stores rather than online.

But June’s retail sales data may have done little to allay growing concerns about inflation.

“Despite Powell’s continued messages about inflation, concerns are clearly growing – particularly about rising home and car prices – and contributing to the roller coaster of a market we are experiencing today,” Loewengart said of E-Trade.

Investors have also digested what was for the most part positive second-quarter business results, but the data has been mixed and market participants are increasingly uncertain about the post-COVID outlook.

“This week’s earnings reports have been generally positive, but the focus is now on what will come next in terms of the outlook, and here the picture is less clear,” wrote Michael Hewson, analyst Chief Market Officer at CMC Markets UK in a research note.

“There was a lot of optimism about the summer reopening, but as we look into the rest of the year and see how Delta variant infections increase some of that optimism, which begs the question of where we’re headed. then for third quarter earnings expectations, ”the analyst wrote.

Lily: ‘Robust’ US economy is strengthening, Fed Beige Book says, but grapples with big shortages and higher inflation

Meanwhile, the spread of the more transmissible variant of the delta coronavirus has fueled nervousness on Wall Street, but the path of least resistance continues to be higher for stocks and lower for Treasury yields, with the index. 10-year benchmark TMUBMUSD10Y,
briefly slipping below 1.30% on Thursday.

The drop in yields suggests that fixed income investors harbor doubts about economic growth in the wake of the pandemic or also share Powell’s view that inflation will be short-lived.

In a phone interview Friday, Quent Capital founder Gregg Fisher highlighted “the incredible rise in the stock market that we have seen over the past year and a half”, expressing concern over stretched valuations. “Start thinking about areas of the world that may not have the rich valuation of the S&P,” said Fisher, whose New York-based company invests in small-cap stocks globally.

Earlier on Friday, US President Joe Biden was scheduled to join Pacific Rim leaders, including China’s Xi Jinping and Russia’s Vladimir Putin, in a virtual meeting to strategize to help economies bounce back from the resurgence of the COVID-19 pandemic.

“I don’t see a large foreclosure of savings given the effectiveness of vaccines, in their current state,” to prevent people from being hospitalized with coronavirus infections, Solloway said. “It’s the unvaccinated people who are the problem.”

Lily: Inflation is skyrocketing. How high will it go? Discover the new MarketWatch tracker.

Which companies were the center of attention?
  • Charles Schwab Corp. SCHW reported second quarter results on Friday which showed profit below estimates, while revenues beat as it opened 1.7 million new brokerage accounts, surpassing 1 million for a third consecutive quarter. The company’s shares fell 2.4%.
  • Actions of GameStop Corp. GME rose 1.3% on Friday, to extend a rebound that started late in the previous session, and kept them on track to end a five-day losing streak.

  • Kansas City South KSU said on Friday it recorded a net loss in the second quarter, due to more than $ 700 million in merger costs, while reporting lower than expected adjusted profit and revenue. Shares fell 1.1%.
  • Bristol-Myers Squibb Co. BMY said on Friday that an advanced stage head and neck cancer treatment study failed to meet its main goals. Shares fell 0.2%.
  • Chinese carpool company listed in the United States Didi Global
    fell 3.2% after state security officials and police were dispatched to company offices on Friday as part of a cybersecurity investigation, AP reported.

  • Intelligence
    was the center of attention after The Wall Street Journal reported that the semiconductor giant was exploring a deal to acquire chipmaker GlobalFoundries for around $ 30 billion. Intel shares slipped 1.5%.
  • Moderna Inc. MRNA,
    + 10.30%,
    Biotech Company Catapulted to Glory After Producing Highly Effective COVID-19 Vaccine, Expected to Join S&P 500 Index, Replacing Pharmaceutical Alexion Inc. ALXN,
    Moderna shares jumped 10.3% and Alexion 0.3%.
How did the other assets behave?
  • The 10-year Treasury bill yield rose less than a basis point to 1.30% on Friday, down 5.4 basis points on the week. Bond yields and prices move in opposite directions.

  • The ICE US Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.1%.

  • Oil futures rose on Friday, with the U.S. benchmark CL00 rising 0.2% to $ 71.81 a barrel, but still down 3.7% for the week. GC00 gold futures slipped 0.8% to $ 1,815 an ounce.

  • In European equities, the Stoxx Europe 600 SXXP closed 0.3% lower and ended 0.6% lower for the week, and London’s FTSE 100 UKX finished lower less than 0.1 %, contributing to a weekly slippage of 1.6% for the stock market.

  • In Asia, the Shanghai Composite SHCOMP fell 0.7% but posted a weekly gain of 0.4%, the Hang Seng HSI index rose 0.03% but recorded a weekly gain of 2.4% and Japan’s Nikkei 225 NIK closed 1% lower but posted a gain of 0.2% for the week.

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