Lackluster Earnings Overshadow Positive Economic Data…..

Strong figures on Q2 economic output and stellar quarterly results from Amazon.com were unable to overcome some disappointing earnings reports from Dow components Intel and Exxon Mobil, pressuring U.S. equities to finish lower in today’s session. Technology issues led the laggards, weighed further by below-par user data from Twitter. Treasuries were higher, with a read on consumer sentiment coming in above expectations, but below month-ago levels, while crude oil prices and the U.S. dollar were lower, and gold was nearly unchanged.

The Dow Jones Industrial Average (DJIA) fell 76 points (0.3%) to 25,451, the S&P 500 Index decreased 19 points (0.7%) to 2,818, and the Nasdaq Composite tumbled 115 points (1.5%) to 7,737. In moderate volume, 756 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.92 to $68.69 per barrel and wholesale gasoline shed $0.01 to $2.11 per gallon. Elsewhere, the Bloomberg gold spot price inched $0.72 higher to $1,223.41 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.1% at 94.66.

Markets were mixed for the week, as the DJIA rose 1.5%, the S&P 500 Index was 0.6% higher, while the Nasdaq Composite declined 1.1%.  The first look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of growth of 4.1%, just shy of the consensus estimate of 4.2%. Q1 GDP expanded by an upwardly revised 2.2% rate. Personal consumption was reported at a 4.0% gain, above the forecasted 3.0% rise, and compared to the downwardly revised 0.5% increase posted in Q1.

The final July University of Michigan Consumer Sentiment Index was adjusted higher to 97.9, from the preliminary 97.1 figure, where forecasts had expected it to remain. The index was slightly below June’s 98.2 level. The upward revision came as the expectations and current conditions components of the report were both adjusted higher from preliminary reads, with the former up and the latter down versus June’s figures. The 1-year inflation forecast dipped m/m to 2.9% from June’s 3.0% and the 5-10 year outlook ticked lower to 2.4% from 2.6%.

Treasuries were higher, as the yield on the 2-year note fell 2 basis points (bps) to 2.65%, and the yields on the 10-year note and the 30-year bond lost 1 basis point to 2.96% and 3.08%, respectively.

Schwab Center for Financial Research – Market Analysis Group

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