Crisis in Turkey Rattles U.S. Markets…..

U.S. equities finished the trading session lower, and mixed for the week, with pressure coming from financials amid escalated Turkish economic/currency turmoil, which boosted the U.S. dollar to exacerbate the negative global sentiment. Technology issues also lost ground, with semiconductor stocks hindered by Microchip Technology’s guidance. Treasuries were higher amid the global concerns, even as consumer price inflation data came in mostly in line with forecasts. Meanwhile, crude oil prices rebounded from a recent decline, and gold was modestly lower.

The Dow Jones Industrial Average (DJIA) fell 196 points (0.8%) to 25,313, the S&P 500 Index decreased 20 points (0.7%) to 2,833, and the NASDAQ Composite was 53 points (0.7%) lower to 7,839. In moderate volume, 827 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil rose $0.82 to $67.63 per barrel and wholesale gasoline gained $0.04 to $2.04 per gallon. Elsewhere, the Bloomberg gold spot price lost $1.17 to $1,211.30 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.8% higher at 96.29. Markets were mixed for the week, as the DJIA declined 0.6%, the S&P 500 Index ticked 0.3% lower, and the NASDAQ Composite increased 0.4%.

The Consumer Price Index (CPI) rose 0.2% month-over-month (m/m) in July, matching the Bloomberg estimate, and following June’s unrevised 0.1% increase. The core rate, which strips out food and energy, also gained 0.2% m/m, in line with expectations to match June’s unadjusted gain. Y/Y, prices were 2.9% higher for the headline rate, matching forecasts to be in line with June’s unrevised increase. The core rate was up 2.4% y/y, slightly above projections to match June’s unadjusted 2.3% increase. Prices for shelter accounted for nearly 60% of the monthly increase, while prices for food, autos, airline fares, and household furnishings all increased. Prices for medical care and apparel both declined, while energy prices also fell.

Although the core rate hit the highest level since September 2008, Fed rate hike concerns don’t appear to be ramping up, possibly due to the Fed signaling some tolerance for inflation temporarily running a bit hot and wage growth remaining subdued.

Treasuries were higher following the inflation data and amid global concerns regarding escalated Turkish turmoil, as the yields on the 2-year note and the 30-year bond declined 5 basis points (bps) to 2.60% and 3.03%, respectively, while the yield on the 10-year note dropped 6 bps to 2.87%.

U.S. stocks finished mixed on the week, amid a continued recovery for the technology sector and a nice gain for consumer discretionary issues on some upbeat results as earnings season moved closer to the finish line. Of the 452 S&P 500 companies that have reported thus far, about 71% have topped revenue forecasts, and nearly 84% have bested earnings estimates, per data compiled by Bloomberg. However, Treasury yields pulled back as inflation readings appeared to keep Fed rate expectations in check and amid a late-week flare-up in Turkish economic/currency turmoil that boosted the U.S. dollar to levels not seen since mid-2017. The greenback’s jump amplified global uneasiness, which was already festering as global trade concerns lingered with China and the U.S. continuing to exchange tariff jabs. Energy stocks moved lower as crude oil prices continued a soft patch, while financials were hamstrung by the downward move in bond yields. Consumer staples were the worst performers on the week.

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