Company / Analytics

Week 32 in Brief

North America

• US stocks rose to close at record highs on Friday, with the Dow, and S&P 500 finishing the week with their longest stretch of closing records since March.
• Stocks struggled to sustain altitude investors digested a largely solid set of recent economic data and earnings results, including the consumer sentiment report which suggested worries about the spread of the delta variant of the coronavirus and its impact on economic growth.

How did the major indices perform?

• In the US, the Dow Jones Industrial Average added 15.53 points, or less than 0.1%, to close at a record 35,515.38, after establishing an intraday record high at 35,610.57.
• The S&P 500 rose 7.17 points, or 0.2%, to end at a record 4,468.00, following an intraday record at 4,468.37.
• The Nasdaq Composite advanced 6.64 points, or less than 0.1%, to finish at 14,822, after hitting an intraday nadir of 14,797.22 and peak at 14,850.61.
• For the week, the Dow booked a 0.9% gain, the S&P 500 advanced 0.7% and the Nasdaq Composite fell 0.1%.

What drove the market?

• Corporate earnings: A slew of stronger-than-expected second-quarter profit results among blue-chip companies has been a key driver of equity markets over the past several months. To date, 91% of S&P 500 components have reported actual second-quarter earnings, with 87% of these having topped Wall Street’s estimates. Assuming this proportion holds through the end of earnings season, it would mark the greatest share of earnings beats ever recorded in FactSet data spanning back to 2008.
• Still, the Nasdaq Composite Index ended the week almost 1% lower as value-related investments handily outperformed growth for the week.
• The string of record closing highs for the major equity market indexes has left traders pondering what might emerge as a catalyst to knock stocks off their upward trajectory. The S&P 500 has not seen a 5% pullback since October of last year and is up nearly 19% so far for the year-to-date. Some strategists suggested the path of least resistance remains up and to the right for stocks.
• Economic Data: The University of Michigan consumer-sentiment index fell sharply to 70.2 in August from 81.2 in the prior month, marking the lowest level since April of 2020, and momentarily knocking the wind of the market’s bullish sails. Still, investors have been buying value-oriented shares, partly inspired by other economic data this week, such as Thursday’s weekly report on new jobless claims which showed a third straight weekly drop in new filings, albeit at a level still elevated compared to 2019 trends and Wednesday’s inflation report on consumer prices which was in-line with estimates.
• On Friday, markets also parsed international trade data, with U.S. import prices rising 0.3% in July after a 1.1% gain in the prior month.
• Biden’s Infrastructure Bill: This week’s record trades were supported by the approval by the U.S. Senate this week, of the roughly $1 trillion infrastructure package with broad bipartisan support, putting it on track to possibly be passed by the House and be signed into law by President Joe Biden. Analysts believe the passage of the infrastructure deal renewed hope for solid few years of economic growth ahead and re-ignited the momentum trade into cyclical stocks, especially financial which were among better performers.
• Coronavirus: The spread of the delta variant of coronavirus and its potential impact on the global economic recovery remains a lingering concern. The U.S. Food and Drug Administration late Thursday authorized an extra COVID-19 shot for those with compromised immune systems but didn’t confirm media reports that it would update emergency-use authorizations for the Pfizer and Moderna COVID-19 vaccines.
• Globally, fresh concerns are surrounding China, which has been battling to keep new Covid outbreaks under control. The partial closure of one of China’s biggest cargo ports due to new cases of Covid has raised fresh concerns about the impact of the pandemic on international trade.

Which stocks were in focus Friday?

• Disney shares jumped 1% after the media and entertainment giant reported its strongest sales and profit since pre-pandemic and forecast-beating new subscriber numbers for its streaming service. Shares closed at $181.08.
• ContextLogic Inc. shares fell 19.8% after the parent of e-commerce site Wish reported slowing demand for its products, less activity on its platform, and higher-than-expected costs. Shares closed at $7.55.
• Shares of Airbnb Inc. rose 1.1% after the lodging-booking firm said second-quarter revenue nearly quadrupled to $1.3 billion, beating analysts’ forecasts, but failed to give specific guidance. Shares closed at $ 152.76.
• Shares of DoorDash Inc. fell 3.5% after the online food-ordering group reported record order volume and total orders in the second quarter but forecast weakness in the third quarter. Shares closed at $ 194.79.

How did the European markets perform?

• European stocks hit new highs on Friday and were on course for a record-breaking run, capping another strong week as investors seize on a dip in U.S. inflation and more forecast-beating corporate earnings.
• The pan-European Stoxx 600 provisionally ended up by about 0.2%, having hit a fresh record high earlier in the session. Most sectors and major bourses were in positive territory.
• Markets in Germany and France added 0.2%. Britain’s FTSE 100 gained 0.3%.
• Among individual stocks and corporate news, Adidas has sold Reebok for up to $2.5 billion to Authentic Brands, as the German sportswear giant opts to focus on its central brand. Adidas shares added 2.3% on Friday.
• Ipsen shares plunged 12.7% to the bottom of the Stoxx 600 after the French pharmaceutical company withdrew a new drug application in the U.S.
• At the top of the European blue-chip index, Swedish health care company Addlife added 4.1%.

How did Asian markets perform?

• Shares in Asia-Pacific retreated in Friday’s trade, with South Korea’s Kospi leading losses among major markets as shares of firms tied to conglomerate Samsung tumbled following the release of the company’s heir from prison.
• Rising regulatory and geopolitical risks are weighing on medium-term growth prospects in China, especially in segments targeted by national reform or security efforts.
• MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.65% and was 0.87% lower for the week.
• China’s Shanghai Composite lost 0.2%, Japan’s Nikkei 225 gave up 0.1%, while Hong Kong’s Hang Seng Index shed 0.5%.

Commodities and Bonds

• The yield on the 10-year Treasury note was 6.9 basis points lower at 1.29%, but the benchmark is up from 1.28% last Friday. Yields and debt prices move in opposite directions.
• Oil prices fell for a second straight day after the International Energy Agency warned that demand growth for crude and its products had slowed sharply due to the spread of coronavirus variants.
• International benchmark Brent crude settled down 72 cents, or 1%, at $70.59 a barrel for the session. U.S. benchmark WTI settled down 0.9% at $68.44 a barrel.
• For the week, Brent fell less than 1%, after dropping 6% last week, its largest week of losses in four months. Last week WTI slumped nearly 7% in its biggest weekly decline in nine months.
• Gold futures ended 1.5% higher, settling at $1,778.20 an ounce, and up about 0.9% on the week.

Currencies

• The dollar held firm on Friday, staying near its highest level in four months against a basket of currencies, as investors looked for more hints from the U.S. Federal Reserve on its plans to reduce monetary stimulus.
• The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, was down 0.6% on the session but 0.3% lower on the week.
• The euro edged higher but at $1.1739 was not far off four-month lows.
• Traders continue to look toward the Fed’s central banking conference in Jackson Hole, Wyoming, later this month, for clues to the Fed’s next move. Nearly two-thirds of economists polled by Reuters said the Fed is likely to announce a taper of its asset purchases - currently set at $80 billion of Treasuries and $40 billion of mortgage-backed securities per month - at its September meeting.
• Sterling was 0.33% higher against the broadly weaker dollar but remained on pace for a second straight week of modest declines as investors look for fresh catalysts for the British currency’s next move after Britain’s growth figures for the second quarter came in as expected.
• Meanwhile, bitcoin climbed 4.624% to $46,500, nearing Wednesday’s three-month peak of $46,787, while Ethereum rose 5.81% to $3,221.52.

Next Week

The earnings season continues with reports expected from major US retailers including Walmart, Target, Home Depot, Lowe’s, Kohl’s, and Macy’s.