Uncertainty Around Myriad Data, Events Saps Sentiment…..
U.S. equities finished lower amid a number of events and data for investors to chew on. Progress on the COVID-19 vaccine/treatment front continued to come up against the increase in new global cases. As well, lawmakers continued to banter back-an-forth on what a potential next wave of fiscal relief should ultimately look like, while the Fed extended emergency lending facilities and it began its two-day monetary policy meeting. Moreover, mixed results from Dow members McDonald’s Corporation, 3M Company and Pfizer Inc. came amid a busy earnings calendar, while D.R. Horton trounced the Street’s forecasts. In economic news, Consumer Confidence fell more than expected as expectations declined solidly, but a read on regional manufacturing jumped back into expansion territory. Treasury yields lost ground as bond prices moved higher and the U.S. dollar paused a recent drop, while gold continued its record run and crude oil prices declined. Markets in both Europe and Asia finished mixed.
The Dow Jones Industrial Average fell 205 points (0.8%) to 26,379, the S&P 500 Index decreased 21 points (0.7%) to 3,218, and the Nasdaq Composite declined 134 points (1.3%) to 10,402. In moderate volume, 725 million shares were traded on the NYSE and 3.8 billion shares changed hands on the NASDAQ. WTI crude moved $0.56 lower to $41.04 per barrel and wholesale gasoline was unchanged at $1.24 per gallon. Elsewhere, the Bloomberg gold spot price jumped $15.76 to $1,958.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 93.74.
Consumer Confidence dips more than expected, Fed extends lending programs ahead of meeting
The Conference Board’s Consumer Confidence Index declined to 92.6 in July, from June’s upwardly-revised 98.3 level, and versus the Bloomberg estimate calling for a decline to 95.0. The index declined more than expected as a solid improvement in the Present Situation Index was more than offset by a drop in the Expectations Index of business conditions for the next six months. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—increased to 1.3 from the -2.8 level posted in June.
The 20-city composite S&P CoreLogic Case-Shiller Home Price Index posted a 3.7% y/y gain in home prices in May, versus the Bloomberg estimate of a 4.0% increase. Compared to the prior month, home prices were little changed on a seasonally adjusted basis, below forecasts of a 0.3% gain.
The Richmond Fed Manufacturing Activity Index for July jumped back to a level depicting expansion (a reading above zero). The index rose to 10 versus forecasts calling for the figure to improve to 5 from June’s 0 level.
The Federal Open Market Committee (FOMC) began its two-day monetary policy meeting today, and although major changes to its stance are unlikely to be announced tomorrow, the markets are likely to pay close attention to the FOMC’s guidance on what further tools it discussed to combat the economic disruption of the pandemic. This morning ahead of today’s meeting, the Fed announced that it will extend through December 31 its lending facilities that were scheduled to expire on or around September 30. The Fed said the three-month extension will “facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the COVID-19 pandemic.”
The next installment of relief measures is expected to come from the fiscal side, with the Republicans unveiling their proposal for the next round of stimulus measures. The plan includes another dose of checks to households and liability protection measures, as well as an extension of extra unemployment benefits that expired over the weekend, though the payments are proposed at a lower rate. The plan will likely face some resistance from the Democrats, which could impact the timing of the fiscal relief measures being deployed, potentially keeping volatility in the markets elevated.
Treasuries were higher as the busy week rolled on, as the yield on the 2-year note lost 1 basis point (bp) to 0.14%, the yield on the 10-year note shed 2 bps to 0.58% and the 30-year bond rate was down 3 bps at 1.22%.
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