Stocks End Week on a Down Note…..

U.S. equities finished the final session of July lower, while also posting losses on a weekly basis, as investors mulled a host of items, including the possible implications of the spreading Delta variant, China’s recent crackdown on big companies, and a flood of earnings and economic data. As the busiest week of earnings season came to a close, Amazon.com’s miss on revenues and softer-than-expected guidance weighed heavily on its shares, as well as the Consumer Discretionary sector and the broader markets. Meanwhile, the Street cheered results from Procter & Gamble even as the company warned of higher commodity cost headwinds, while Dow members Chevron missed revenue forecasts and Caterpillar noted supply chain challenges and higher manufacturing costs. On the economic front, personal income and spending topped estimates and Chicago manufacturing growth surprisingly accelerated, while consumer sentiment was revised higher but still below the prior month’s level. Treasuries were higher, applying downside pressure on yields, and the U.S. dollar rose, while crude oil prices saw only modest gains and gold was lower. Overseas, Europe finished in the red after a two-day winning streak amid the continued Delta uncertainty and China’s recent crackdown, and markets in Asia also saw losses.

The Dow Jones Industrial Average lost 149 points (0.4%) to 34,935, the S&P 500 Index shed 24 points (0.5%) to 4,395, while the Nasdaq Composite decreased 106 points (0.7%) to 14,673. In heavy volume, 1.1 billion shares were traded on the NYSE and 3.6 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.33 higher to $73.95 per barrel. Elsewhere, the Bloomberg gold spot price traded $13.50 to the downside to $1,814.67 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.3% to 92.14.

Personal income rose 0.1% month-over-month (m/m) in June, versus the Bloomberg forecast of a 0.3% decrease, following May’s downwardly-revised 2.2% drop. Personal spending gained 1.0%, north of estimates of a 0.7% gain and compared to the prior month’s negatively-adjusted 0.1% dip. The June savings rate as a percentage of disposable income was 9.4%.

The PCE Deflator increased 0.5% m/m, below expectations of a 0.6% gain and matching May’s upwardly-adjusted increase. Compared to last year, the deflator was 4.0% higher, in line with estimates and matching May’s upwardly-adjusted gain. Excluding food and energy, the PCE Core Index rose 0.4% m/m, south of expectations of a 0.6% increase and versus May’s unadjusted 0.5% rise. The index was 3.5% higher y/y, below estimates of a 3.7% increase and above May’s unadjusted 3.4% gain.

The July final University of Michigan Consumer Sentiment Index was revised higher to 81.2, versus expectations to be unrevised at the preliminary reading of 80.8. The upward revision came as an unchanged reading on the current conditions component of the survey was met with an upward adjustment to the expectations portion. However, the overall index was lower versus June’s 85.5 level, as sentiment regarding both expectations and current conditions fell. The 1-year inflation forecast came in at 4.7%, down from the preliminary reading of 4.8%, but above June’s 4.2% rate, and the 5-10 year inflation forecast also dipped to 2.8% from the 2.9% level in the initial estimate and matching the prior month’s forecast.

The Q2 Employment Cost Index increased 0.7% quarter-over-quarter (q/q), below estimates calling for it to match Q1’s unadjusted 0.9% rise.

The Chicago PMI unexpectedly improved, moving further into a level depicting expansion (a reading above 50). The index rose to 73.4 in July from June’s 66.1 reading, versus estimates calling for a decrease to 64.2. The surprising increase back above 70 came as growth in new orders, order backlogs and production all accelerated, and the contraction in employment decelerated, though inflation pressures remained as prices paid slowed but maintained an elevated rate.

Treasuries were higher amid some choppiness in the wake of this week’s Fed monetary policy decision.

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