Friday July 30th

30-07-2021

Dow futures pare losses after softer-than-expected inflation reading

U.S. stock index futures cut earlier losses on Friday after a key inflation indicator showed better-than-feared price pressures. Dow Jones Industrial Average futures were down 80 points, bouncing off its lowest level. Contracts tied to the Nasdaq 100 futures fell 1.2% amid a soft earnings report from Amazon, while those tied to the S&P 500 shed 0.7%. An inflation indicator that the Federal reserve uses as its key guide rose 3.5% in June, a sharp acceleration that was nonetheless right around Wall Street expectations, the Commerce Department reported Friday. The personal consumption expenditures price index excluding food and energy rose 3.5% in June on a year-over-year basis. It marked a sharp acceleration in inflation but came in slightly below a Dow Jones expectation of a 3.6% jump. Amazon sank 6.4% in premarket trading after it reported its first quarterly revenue miss in three years and gave weaker guidance. Pinterest fell even further, down 21%, after saying it lost monthly users during the three months ended June 30. Major averages are still on track for a solid month, although volatility has picked up amid concerns about the economic recovery in the face of the spreading delta variant. The Nasdaq Composite and Dow have added 1.89% and 1.69% respectively in July, while the broad S&P 500 is up 2.83% over the same period. Utilities, health-care, real estate and technology stocks have led the S&P 500 higher for the month, while energy and financials have lagged. “There has been quite a bit of volatility and price choppiness in the market in recent weeks,” Brian Belski, chief investment strategist at BMO, said in a note. “Increased concerns over the delta variant and its potential implications for reopening momentum seemed to play a key role in the price action, while peak themes related to economic growth, earnings, and policy support also remained an overhang on risk sentiment.” Procter & Gamble shares rose 1.4% after the consumer giant topped analysts’ estimates for quarterly earnings and revenue. However, the company warned that increasing commodity costs could hit its earnings in the upcoming year. Shares of online brokerage Robinhood started trading on the Nasdaq at $38 per share on Thursday, but the stock eventually closed its debut session more than 8% lower $34.82 per share. Robinhood shed another 1.5% in premarket trading. Weaker-than-expected readings on the U.S. economy further eased concerns about the Federal Reserve dialing back asset purchases. U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less than the 8.4% Dow Jones estimate. Meanwhile, the latest weekly jobless claims also came in higher than expected. Fed Chairman Jerome Powell on Wednesday noted that while the economy has come a long way since the Covid-19 recession, it still has a ways to go before the central bank considers adjusting its easy-money policies. “While shy of expectations specifically for Q2 GDP, broadly speaking as Chairman Powell noted yesterday, the recovery has in many ways exceeded even the most optimistic forecasts,” Stifel Chief Economist Lindsey Piegza wrote Thursday afternoon. “With U.S. businesses reopen for business and American consumers anxious to rush into the marketplace and spend, growth in the first half of the year was solid.” A week of volatile trading in Chinese markets has left Hong Kong’s Hang Seng index 5% lower. Both Hong Kong and mainland-listed stocks fell on Friday, losing the partial recovery they made after diving earlier this week. Hong Kong’s Hang Seng index ended Friday off session lows, but still closed about 1.4% lower at 25,961.03. Mainland-listed stocks were also subdued. The CSI 300 tumbled 0.81% to 4,811.17, while the Shanghai composite declined 0.42% to 3,397.36 and the Shenzhen component was down 0.29% to 14,473.21. Japan’s Nikkei 225 dipped 1.8% to close at 27,283.59, while the Topix lost 1.37% to 1,901.08. South Korea’s Kospi was down around 1.24% to close at 3,202.32. Oil prices fell on Friday but remained on track to post weekly gains with demand growing faster than supply, while vaccinations are expected to alleviate the impact of a resurgence in COVID-19 infections across the globe. Brent crude futures for September, which expires on Friday, dipped 2 cents to $76.03 a barrel, following a 1.75% jump on Thursday. The more active Brent contract for October was down 14 cents, or 0.2% to $74.96 per barrel. U.S. West Texas Intermediate (WTI) crude futures slid 8 cents to $73.53 per barrel, whittling down a 1.7% rise from Thursday. Gold prices held firm near a two-week high on Friday, heading for their biggest weekly gains in more than two months after the U.S. Federal Reserve cemented investors hopes that interest rates are going to stay low for some time. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. Spot gold was up 0.1% at $1,829.10 per ounce by 5:17 a.m. ET, after hitting its highest since July 15 at $1,832.40 on Thursday. It is up 1.5% so far for this week. U.S. gold futures eased 0.2% to $1,832.80.