U.S. equities survived a tumultuous week largely intact. Investors weighed mixed earnings reports, inflation figures, and rising COVID-19 cases attributed to the Delta variant. Labor market headlines will remain in focus after the Fed’s comments, and with jobless claims stubbornly stuck at the 400,000 level, investors will welcome additional data this week with the U.S. ADP employment report on Wednesday, followed by the monthly non-farm payrolls report on Friday.
Last Week
U.S. equities survived a tumultuous week largely intact. Investors weighed mixed earnings reports, inflation figures, and rising COVID-19 cases attributed to the Delta variant. The Nasdaq slipped 1% after Amazon’s first EPS miss in 3 years. The Dow and S&P 500 finished slightly lower. The S&P 500
Equal-Weight Index gained ground as value outperformed growth. U.S. Treasury yields fell after the Federal Reserve indicated it is in no hurry to tighten monetary policy.
The Fed’s accommodative stance sent the dollar tumbling, lifting gold prices and sending crude oil higher by 2%. Fed Chair Powell also indicated that asset purchase tapering would likely be tied to labor market improvements as opposed to consumer price data. The U.S. GDP report highlighted how much the economy is struggling to readjust to the new normal. Second quarter growth accelerated by a robust 6.5%, but well below estimates of 8.4%. Some sectors continue to be held back by supply constraints, while others stress to recover from the pandemic.
U.S. home prices continue to break records, but new home sales stumbled in June, dropping 6.6%. Pending sales of existing homes dropped 1.9%. Consumer confidence remained high, as the Conference board’s index improved for a 6th straight month in July. U.S. durable goods saw continued growth in June, but the 0.8% increase fell short of the 2.1% expected. Chicago PMI surged to 73.4 in July, just shy of a record high. Inflation persisted in June, with the Core PCE Price Index rising 3.5% YoY, the biggest move since 1991. Finally, Chinese stocks remained under pressure as the SEC has stopped processing U.S. IPO registrations of Chinese companies while it considers new disclosures.
Week Ahead – Tug of War continues…
Labor market headlines will remain in focus after the Fed’s comments, and with jobless claims stubbornly stuck at the 400,000 level, investors will welcome additional data this week. The U.S. ADP employment report comes out on Wednesday, followed by the monthly non-farm payrolls report on Friday. U.S. ISM PMIs will also refresh, with services on Wednesday. Two more global central bank meetings await. The RBA may reverse its recent tapering plans amid continued lockdowns in Australia, while the BOE will consider hot inflation figures and a surprise drop in new UK coronavirus cases. Although many of the big names have already reported, Q2 earnings season is only halfway over. S&P 500 Y/Y revenues are up a record 21% and earnings up 86%, expectations for Q3 and Q4 are building.
Year-to-date index performance; Dow up 14.14%, S&P up 17.02%, and Nasdaq up 13.85% through the close last Friday.
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