S&P 500, Dow dip amid oil price declines as virus concerns rise
Stocks fell on Monday and lost some momentum after reaching all-time highs late last week. Commodity prices plummeted as concerns about the spread of the coronavirus flared up again and crude oil prices fell sharply.
The S&P 500 fell as stocks of oil companies like Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) fell. The Dow also fell, hurt by a decline in Chevron (CVX) stocks.
US West Texas Crude Oil (CL = F) futures fell more than 4% from Monday morning lows and continued a weekly decline of more than 7.5% last week. Brent crude (BZ = F), the international standard, also fell. Other commodities also fell Monday morning, including copper, silver and gold futures, each of which was down at least 1%. Government bond yields rebounded from falling early and the benchmark 10-year yield fell back above 1.3%.
The moves came amid growing concerns about coronavirus infection rates and new restrictions in China, a major demand center for global commodities.
The world’s second largest economy has taken new measures, including flight cancellations and other travel restrictions, in some of the country’s hardest-hit areas to curb the spread of the virus. China’s National Health Commission last confirmed 125 new infections on Sunday, up from 96 from the previous day.
“The virus numbers are still very low compared to other countries. But the spread of the delta variant calls China’s ‘zero COVID’ approach into question. While most governments are now beginning to recognize that we will likely have to live with the coronavirus, China’s long-term ambition remains to keep it out of the country entirely, “wrote Neil Shearing, chief economist for the group for Capital Economics, in a note Monday morning.
“Without changing the approach, this suggests that China must continue with occasional local lockdowns and movement restrictions,” he added. “This, in turn, will prevent a full return to pre-pandemic consumer and business behavior norms and will likely keep outbound travel restrictions in place for some time.”
The story goes on
Concerns about the Delta variant also emerged on the quarterly earnings calls for a number of large corporations, raising the specter of a further slowdown in consumer spending on services. Glenn Fogel, CEO of Booking Holdings (BKNG), said last week that rising COVID case numbers and newly imposed travel restrictions resulted in “a modest decline” in travel booking trends in July compared to June. Likewise, Lumber Liquidator Holdings (LL) suggested investors “slow down comparable sales” while the home renovation retailer works through potential consumer demand shifts and the potential impact of the COVID-19 Delta variant, “CFO Nancy Walsh said during the company’s presentation Profit call last week.
Still, a number of economists have underscored the continued strength of the U.S. economic recovery, even as new virus-related risks emerge. The US economy created more than 900,000 jobs in both July and June, as last Friday’s labor market report showed, and separate surveys of activity in manufacturing and services have indicated continued expansion.
US corporate earnings results were also strong overall. As of Friday, 89% of companies in the S&P 500 had reported second-quarter earnings results, with 87% of them exceeding Wall Street estimates for earnings per share, according to FactSet data. If that stake holds, it would be the highest percentage of S&P 500 companies to beat earnings estimates since at least 2008.
The quarterly earnings season continues this week, with companies from Coinbase (COIN) to Disney (DIS) reporting results.
4:03 p.m. ET: Stocks end up mixed: Dow drops 108 points, or 0.3%, to retreat from record high as virus concerns hit energy stocks
Here were the key moves in the markets as of 4:03 p.m. ET:
S & P-500 (^ GSPC): -4.19 (-0.09%) to 4,432.33
Dow (^ DJI): -106.99 (-0.30%) to 35,101.52
Nasdaq (^ IXIC): +24.42 (+ 0.16%) to 14,860.18
Raw (CL = F): – $ 1.44 (-2.11%) to $ 66.84 per barrel
Gold (GC = F): $ -31.30 (-1.78%) to $ 1,731.80 per ounce
10-year treasury (^ TNX): +2.7 bps to generate 1.3170%
12:32 p.m. ET: Three key takeaways from the winning season, according to Goldman Sachs
A string of better-than-expected corporate earnings for the second quarter continues as corporate earnings rebound from last year’s levels of new orders.
But consistent with the forward-looking nature of the market, investors have largely looked through those estimates, beating the results, and foreseeing the projections.
Goldman Sachs’ chief US equities strategist David Kostin said there have been three key takeaways from corporate earnings comments so far.
“Companies expect to manage rising input costs and increase margins by enforcing prices or cutting costs; (2) companies plan to use cash to fund growth investments or buybacks; (3) tax reforms and antitrust uncertainties pose risks to earnings ever Share 2022 and M&A activities. ” “Wrote Kostin in a note.
“We reiterate our recommendation to own tactically beaten reopening stocks alongside strategic, high-quality growth stocks,” he added.
11:23 a.m. ET: Consumer inflation expectations held at record highs in July: New York Fed
US consumer inflation expectations remained at record highs in July as persistent supply chain and labor restrictions pushed up forecasts for price hikes.
According to the monthly survey by the New York Federal Reserve, consumers expect median inflation to rise by 4.8% over the next year. This was in line with June’s value, which was the highest in the history of the survey.
For the next three years, consumers expect inflation to rise by 3.7%, which will increase slightly compared to the 3.6% in June and the highest expected level since 2013, and will decrease slightly compared to the 6.2% in June.
11:07 am ET: Growth and value stocks have been “head to head so far” this year: Strategist
Despite Monday’s pullback, the S&P 500 is still hovering near an all-time high, fueled by optimism about the economic rebound and the rebound in corporate earnings.
But beneath the surface, there has been a back-and-forth in leadership between tech growth stocks and value stocks, especially in cyclical areas like energy and financials.
“Growth and value have indeed been head to head this year,” Emily Roland, co-chief investment strategist, John Hancock Investment Management, told Yahoo Finance. “We saw these enormous shifts. Often it has to do with interest rates: So, of course, the idea that if interest rates rise, it will benefit more cyclical parts of the market, especially financials, which will raise the value complex, and if interest rates then fall, which reflects a more moderate growth environment, it will be rewarded this is usually growth or parts of the market that have longer-term cash flows that are discounted at a lower rate. ”
“It seems like this big divide between growth and value investors has opened up. I’m here to tell you they can live together, ”she added. “We want to take both into account in this market. Here, too, this quality factor is more likely to be found on the growth side of the company … but we would like to play the cyclical recovery that is still taking place here in the US aggressively.”
10:00 a.m. ET: Job openings rose to a record high in June, exceeding 10 million
US job vacancies hit an all-time high in June, further underscoring the extent of the labor shortage and demand that continues to weigh on the overall pace of economic recovery.
The Department of Labor’s monthly job vacancy and labor turnover report showed the number of vacancies rose to 10.1 million in June. According to Bloomberg data, consensus economists were looking for just under 9.3 million. The vacancies in May were also revised up to almost 9.5 million, compared to the 9.2 million previously reported.
The largest increases in job vacancies were in professional and business services, at 227,000. Other areas of the service economy also recorded increased job vacancies: at the end of June, the number of jobs in retail and catering was over 120,000 each.
The layoff rate in June was unchanged from May at 0.9%, the lowest level on record.
9:32 am ET: Stocks decline as commodity prices fall
Here the markets were traded shortly after the opening bell:
S & P-500 (^ GSPC): -3.24 (-0.07%) to 4,433.28
Dow (^ DJI): -80.15 (-0.23%) to 35,128.36
Nasdaq (^ IXIC): +8.37 (+ 0.02%) to 14,837.80
Raw (CL = F): $ 1.79 (-2.62%) to $ 66.49 per barrel
Gold (GC = F): $ -18.90 (-1.07%) to $ 1,744.20 per ounce
10-year treasury (^ TNX): -1.6 bps to generate 1.272%
7:11 a.m. ET Monday: Mixed stock futures trading
Here the markets were traded on Monday morning:
S&P 500 futures (ES = F): -6.25 points (-0.14%) at 4,423.25
Dow futures (YM = F): -104.00 points (-0.3%) to 34,987.00
Nasdaq Futures (NQ = F): +25.25 points (+0.17%) to 15,120.75
Raw (CL = F): $ -2.75 (-4.03%) to $ 65.53 per barrel
Gold (GC = F): $ -12.90 (-0.73%) to $ 1,750.20 per ounce
10-year treasury (^ TNX): -0.6 bps to generate 1.282%
NEW YORK, NY – JUNE 02: Exterior view of the New York Stock Exchange and Wall Street as the new company Organon begins trading next Thursday in New York on June 02, 2021. Organon plans to expand to offer treatments for other conditions that are only applicable to women. About 80% of the new company’s revenues will be generated outside of the US (Photo by Kena Betancur / VIEWpress)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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