Equities Waver Ahead of Tomorrow’s FOMC Decision…..
U.S. stocks closed lower as the markets took a moment to reassess a recent run that pushed equities into record high territory. The downward move came as the markets braced for tomorrow’s highly anticipated monetary policy decision from the Fed, while also weighed several persistent headwinds to the global economy. Most notably, the global markets continued to wrestle with the economic impacts of the ongoing spread of the Delta coronavirus variant as well as the intensified crackdown on big business by China. Growth-oriented issues struggled the most as the Consumer Discretionary, Communications and Information Technology sectors all underperformed, whereas Utilities and Real Estate led the way. Earnings season continued to chug along but results from Tesla, Dow member 3M, UPS and GE were met with mixed reactions. In economic news, Consumer Confidence unexpectedly improved, durable goods orders missed forecasts, home prices rose more than expected, and regional manufacturing growth surprisingly accelerated. Treasuries traded higher to apply pressure on yields, while the U.S. dollar dipped. Gold prices turned modestly higher while crude oil prices were down. Asia finished mixed with China and Hong Kong falling, while Europe closed lower as Financials and Energy slid.
The Dow Jones Industrial Average decreased 86 points (0.2%) to 35,059, the S&P 500 Index declined 21 points (0.5%) to 4,401, and the Nasdaq Composite fell 180 points (1.2%) to 14,661. In moderate volume, 881 million shares were traded on the NYSE and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil ticked $0.26 lower to $71.65 per barrel. Elsewhere, the gold spot price modestly increased $0.60 to $1,799.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 92.44.
Durable goods orders miss, Consumer Confidence surprisingly improves to pre-pandemic levels…..
June preliminary durable goods orders rose 0.8% month-over-month (m/m), versus the Bloomberg estimate of a 2.2% rise and compared to May’s upwardly-revised 3.2% increase. Ex-transportation, orders were up 0.3% m/m, below of forecasts of a 0.8% gain and compared to May’s positively-adjusted 0.5% rise. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, gained 0.5%, compared to projections of a 0.7% rise, while the prior month’s figure was revised higher to a 0.5% increase.
The Conference Board’s Consumer Confidence Index unexpectedly improved to 129.1 in July from June’s upwardly-revised 128.9 level, and versus estimates calling for a 123.9 figure. The index improved to the highest level since February 2020 as an improvement for the Present Situation Index portion of the survey more than offset a dip 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”—continued to increase, ticking higher to 44.4 from the 44.2 level posted in June. 12-month inflation expectations edged slightly lower.
The Conference Board added that, “Consumers’ appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start. Consumers’ optimism about the short-term outlook didn’t waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve. Short-term inflation expectations eased slightly but remained elevated. Spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles, and major appliances in the coming months. Thus, consumer spending should continue to support robust economic growth in the second half of 2021.”
The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 17.0% y/y gain in home prices in May, versus estimates of a 16.3% increase. Compared to the prior month, home prices were up 1.8% on a seasonally adjusted basis, above forecasts of a 1.5% gain.
The Richmond Fed Manufacturing Activity Index unexpectedly moved further into expansion territory (a reading above zero) for this month. The index moved higher to 27 from June’s 22 reading, and versus forecasts calling for a decline to 20. Growth in new orders decelerated, but wages jumped, along with employment, and shipments. Prices paid remained elevated after gaining ground.
Treasuries were higher as yields remained choppy, with the yield on the 2-year note down 1 basis point (bp) to 0.20%, while the yields on the 10-year note and 30-year bond declined 5 bps to 1.24% and 1.89%, respectively.
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