Continued Uncertainties Remain a Drag on Stocks…..
U.S. equities finished lower in the face of persistent worries surrounding the implications of the Delta coronavirus variant, China’s continued regulatory crackdown, and the fallout from the recent collapse of the Afghanistan government. Investors were given another dose of earnings and economic data to chew on, as well as the afternoon release of the minutes from the Fed’s July monetary policy meeting that suggested tapering of its bond-buying activities could begin this year. On the earnings front, Lowe’s Companies rallied on the heels of its better-than-expected results, while Target Corporation saw pressure despite besting the Street’s forecasts. Housing data was the focus of today’s economic calendar, as construction activity came in mixed, with housing starts falling short of expectations but building permits coming in stronger than forecasts, and mortgage applications falling last week. Treasuries were mixed and the U.S. dollar was flat, while gold nudged lower in choppy trading and crude oil prices lost ground. Markets in both Europe and Asia finished mixed amid the continued uneasiness.
The Dow Jones Industrial Average fell 383 points (1.1%) to 34,961, the S&P 500 Index declined 48 points (1.1%) to 4,400, and the Nasdaq Composite decreased 130 points (0.9%) to 14,526. In moderate volume, 799 million shares were traded on the NYSE and 3.8 billion shares changed hands on the Nasdaq. WTI crude oil moved $1.13 lower to $65.21 per barrel. Elsewhere, the gold spot price lost $0.70 to $1,787.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 93.14.
Housing starts for July fell 7.0% month-over-month (m/m) to an annual pace of 1,534,000 units, below the Bloomberg consensus forecast of 1,600,000 units, and compared to June’s upwardly-revised pace of 1,650,000 units. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, rose 2.6% m/m at an annual rate of 1,635,000, above expectations calling for 1,610,000 units, and compared to the downwardly-revised 1,594,000 unit pace in June. Single- and multi-unit structure starts were lower m/m, while permits for multi-unit structures posted double-digit gains compared to the prior month and single-unit permits fell. Single-unit starts were higher y/y and multi-unit starts were down, while permits for both were higher compared to last year.
In other housing news, the MBA Mortgage Application Index fell by 3.9% last week, following the prior week’s 2.8% increase. The decline came as the Refinance Index dropped 5.3% and the Purchase Index dipped 0.8%. The average 30-year mortgage rate rose 7 basis points (bps) to 3.06%.
In afternoon action, the Federal Reserve released the minutes from its July monetary policy meeting in which the Central Bank left its interest rate and balance sheet policy unchanged but opened the door a bit more to tapering its bond purchases. The report showed that most members of the Committee “judged that it could be appropriate to start reducing the pace of asset purchases this year.” As well, most participants indicated that the standard for progress toward its mandate of price stability had been achieved, the Committee’s favored inflation indicator—the PCE Price Index—hitting 4.0% y/y in June, compared to its 2.0% target.
The timing of when the Fed will begin to rein in its extremely loose monetary policy amid the backdrop of inflation pressures, signs of recovery in the labor market, and the festering Delta variant, remains a key area of focus for the markets.
Treasuries were mixed, as the yields on the 2-year and 10-year notes gained 1 bp to 0.22% and 1.27%, respectively, while the 30-year bond rate dipped 1 basis point to 1.91%.
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