Stocks Plummet as Virus Concerns Intensify…..
U.S. stocks took a tumble today, closing noticeably lower, as concerns over the persistent global spread in cases of the Delta coronavirus variant seemed to heighten fears about the potential for fresh restrictions around the globe. Investors appeared to pile into more risk averse assets, as the risk-off sentiment that arose late last week continued into today. Treasuries extended a rally that has applied noticeable pressure on yields as investors worried if peak earnings and economic growth rates were in the rearview mirror. Crude oil prices fell sharply to extend a recent decline after an agreement between OPEC and its allies, known as OPEC+, to increase production over the coming months. The U.S. dollar modestly added to a rebound and gold traded lower. An economic week full of housing data got out of the blocks with a dip in homebuilder sentiment, but remained in solidly positive territory as reported by the NAHB. Earnings season is set to kick into high gear this week with a broader read on Q2’s results and AutoNation got the ball rolling by easily topping forecasts. In M&A news, Zoom Video Communications agreed to acquire intelligent cloud contact center provider Five9 in an all-stock transaction valued at about $14.7 billion. Asia finished broadly lower and Europe saw a widespread selloff.
The Dow Jones Industrial Average fell 726 points (2.1%) to 33,962, the S&P 500 Index declined 69 points (1.6%) to 4,258, while the Nasdaq Composite lost 152 points (1.1%) to 14,275. In heavy volume, 1.1 billion shares were traded on the NYSE and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil tumbled $5.21 to $66.35 per barrel. Elsewhere, the gold spot price decreased $5.80 to $1,809.20 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.2% to 92.85.
Q2 earnings season has kicked into high gear, and this week we are expected to get a broader look at how companies fared after last week was dominated by the banking sector results. Although early and these rates are likely to change, of the 39 S&P 500 companies that have reported thus far, roughly 85% have topped revenue forecasts, and approximately 87% have bested earnings estimates, per data compiled by Bloomberg. Compared to the same period last year, sales are tracking to be up nearly 13.0% and earnings are so far about 139% higher.
The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in July dipped to 80 from June’s 81 level, where the Bloomberg consensus forecast called for it to remain. The NAHB said, “Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment. This is putting upward pressure on home prices and sidelining many prospective home buyers even as demand remains strong in a low-inventory environment.” The report added that this strong buyer demand helped offset supply-side challenges as the index only ticked lower and a reading north of 50 for the index depicts positive conditions.
Treasuries extended a recent rally that has taken yields down sharply. The yield on the 2-year note fell 1 basis point (bp) to 0.21%, while the yields on the 10-year note and 30-year bond declined 10 bps to 1.19% and 1.82%, respectively.
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