U.S. stock indexes fell Friday afternoon during the last trading day of the month, with renewed concerns about a rise of delta variant cases of COVID-19 and disappointing results from Amazon.com being partly blamed for the slump.
What are major indexes doing?
The Dow Jones Industrial Average
fell 162.05 points, or 0.5%, to 34,922.48, after touching an intraday high in positive territory at 35,106.30.
The S&P 500 index
declined 22.5 points, or 0.5%, to 4,396.65.
The Nasdaq Composite Index
dropped 102.52 points, or 0.7%, to 14,675.74.
On Thursday, the Dow rose 153.60 points, or 0.4%, to close at 35,084.53, The S&P 500 finished at 4,419.15, up 18.51 points, or 0.4% and the Nasdaq Composite advanced 15.68 points, or 0.1%, to end at 14,778.26.
Stocks finished higher on Thursday after data that showed gross domestic product growing at an annualized pace of 6.5% in the second quarter. Investors also shook off a lukewarm debut for shares of commission-free trading app Robinhood Markets
What’s driving the market?
A pullback for stock markets was taking shape to end the month’s action on Wall Street, after 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.
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.”
Also former Food and Drug Administration commissioner Scott Gottlieb told CNBC on Friday, that he believes that new coronavirus infections could be accelerating.
“I wouldn’t be surprised if, on the whole, we’re infecting up to a million people a day right now, and we’re just picking up maybe a 10th of that or less than a 10th of that,” he told CNBC’s Squawk Box.
“US stocks were dragged down by a big miss from Amazon and cautious comments from former FDA chief Scott Gottleib that he wouldn’t be surprised if, on the whole, we’re infecting up to a million people a day right now,” wrote Edward Moya, senior market analyst at Oanda, in a research note.
Technology stocks were leading U.S. stocks lower on Friday, with Amazon.com
shares down about 7% 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.
On the tech front, “there’s little forgiveness, especially when you are sitting at all-time highs,” said Shawn Cruz, TD Ameritrade senior market strategist, in a phone interview Friday.
More than half of companies in the S&P 500 index have now reported second-quarter earnings, Cruz said, with investors digesting that data along with the guidance and commentary provided by management as they wrap up a final day of trading for the month. Some might begin to reposition their portfolios, he suggested, as the market now has had a “pretty good look” at the results, which so far have been strong.
A heavy week of corporate earnings reports comes as 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.
Meanwhile, consumer spending rose a sturdy 1% in June, the government said Friday. On Thursday, the government said consumer outlays surged almost 12% in June on an annualized basis, underpinning a strong economic recovery.
Separately, St Louis Federal Reserve President James Bullard said that he thinks financial markets “are very much ready for a taper,” noting that he would prefer to begin the process of scaling back on Fed’s $120 billion a month in Treasurys and mortgage-backed securities this fall and finish by the end of the first quarter of 2022. His comments come after the Fed on Wednesday held interest rates steady at a range between 0% and 0.25% and emphasized the central bank’s view that rising prices are almost entirely the result of the reopening of the U.S. economy.
Friday’s economic reports follow a reading on Thursday that showed U.S. gross domestic product 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.
In other economic news on Friday, the Chicago Business Barometer, also known as the Chicago purchasing managers index, came in at 73.4 in July, versus expectations for 64.2 and 66.1 last month.
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.
“Consumers expressed greater pessimism over the outlook in July as higher inflation and greater Delta spread weighed on sentiment,” wrote Oxford Economics economist Mahir Rasheed, in a Friday research note.
“Concerns over inflation continue to plague sentiment as buying conditions for housing, vehicles, and other household durables slumped to a new cycle low and their lowest level since the early 1980s,” the U.S. economist wrote.
But considering the dovish stance of central banks along with strong corporate earnings as the economy continues to reopen, “it’s very, very unlikely that the delta variant is going to create anything like we saw in the pandemic at the front-end,” according to Tom Mantione, a managing director with UBS Private Wealth Management.
With stocks trading lower Friday, Mantione suggested in a phone interview that investors might seek buying opportunities in stocks tied to the reopening trade, such as energy and banks, as well as longer-term opportunities in thematic tech trends that could tie into areas like health care.
“In our view, investors can use this volatility to round out portfolios,” he said.
Which companies are in focus?
Amazon AMZN 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 growth of 27%. Shares were down 7.3% Friday afternoon.
Shares of Chevron Corp. CVX were down 1.2% Friday afternoon, 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 Co.
increased 2.2% 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.
fell 3.4% 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.
Illinois Tool Works Inc. ITW reported second-quarter that more than doubled and beat expectations, and raised the full-year outlook, as the all business segments saw double-digit organic revenue growth in the face of rising raw materials costs and supply chain challenges. Its stock was down 0.8%.
L Brands Inc. LB said Friday it will invest $45 million over at least the next five years to implement a suite of corporate governance measures agreed to as part of a settlement of stockholder derivative claims. Shares of L Brands, parent of Victoria’s Secret and Bath & Body Works, were up 0.9%.
Capri Holdings Ltd. CPRI shares rose 10.3% after the luxury company, and parent of Michael Kors, reported fiscal first-quarter earnings that blew past expectations and gave guidance ahead of consensus.
Bloomin’ Brands Inc. shares BLMN fell 0.2% even as the parent of Outback Steakhouse beat consensus estimates for the second quarter and offered upbeat guidance.
VF Corp. VFC , 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 6.1%.
What are other markets doing?
Treasury yields slipped, with the yield on the 10-year Treasury note
at 1.229%, down more than 4 basis points on the day.
The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.4%.
Oil futures were trading slightly higher, with the U.S. benchmark
up 0.2%, at $73.76 a barrel, headed for a weekly gain and a marginal monthly rise; while December gold futures GC00 GCZ21 fell 1% to settle at $1,817.20 an ounce, but booked weekly and monthly gains.
In European equities, the Stoxx 600 Europe index XX:SXXP ended 0.5% lower, while London’s FTSE 100 UK:UKX closed down 0.7%. For the week, the Stoxx 600 is up 0.05%, and locked a 2% monthly rise, while the FTSE 100 notched a weekly advance of 0.07% but booked a decline in July of less than 0.1%.
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 CN:SHCOMP finished down 0.4% and logged 4.3% weekly slump and fell 5.4% for the month. Meanwhile, Japan’s Nikkei 225 JP:NIK declined 1.8% overnight in Asia, falling 1% for the week and 5.2% for the month. The China CSI 300
closed down 0.8% for the day, 5.5% for the week and booked a nearly 8% monthly decline.
— Barbara Kollmeyer contributed to this report.