Stocks Show Some Resiliency in Face of Disappointing Data…..

U.S. stocks battled back from early weakness and finished higher. The markets saw morning pressure in the wake of an unchanged monetary policy decision from the Bank of Japan (BoJ) and a larger-than-expected rate hike from the European Central Bank (ECB). Additionally, earnings and economic data was robust and mostly softer than expected. Jobless claims continued to accelerate, leading indicators fell for a fourth-straight month, and Philadelphia manufacturing output unexpectedly moved further into contraction territory. United Airlines and American Airlines both missed earnings forecasts, and AT&T topped expectations but lowered its cash flow outlook, while Tesla bested estimates but noted production challenges in China. Outside earnings, Amazon announced an agreement to acquire One Medical for close to $4.0 billion. Treasuries were higher to apply downside pressure on yields, but the inversion of the yield curve remained. The U.S. dollar declined and continued to pullback from multi-decade highs, and crude oil prices fell, though gold gained ground. Asia finished mixed after the BoJ’s decision, and Europe diverged on the heels of the ECB’s decision.

The Dow Jones Industrial Average rose 162 points (0.5%) to 32,037, the S&P 500 Index increased 39 points (1.0%) to 3,999, and the Nasdaq Composite gained 162 points (1.4%) to 12,060. In moderate volume, 4.6 billion shares of NYSE-listed stocks were traded, and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil dropped $3.53 to $96.35 per barrel. Elsewhere, the gold spot price advanced $16.80 to $1,717.00 per ounce, and the Dollar Index lost 0.3% to 106.80.

Jobless claims continue to rise, leading indicators and Philly manufacturing output fall

Weekly initial jobless claims came in at a level of 251,000 for the week ended July 16, above the Bloomberg consensus estimate calling for 240,000 and compared to the prior week’s unrevised 244,000 level. The four-week moving average rose by 4,500 to 240,500, and continuing claims for the week ended July 9 increased by 51,000 to 1,384,000, versus estimates of 1,340,000. The four-week moving average of continuing claims increased by 13,250 to 1,353,250.

The Conference Board’s Leading Economic Index (LEI) (chart) for June declined 0.8% month-over-month (m/m), worse than the estimate calling for a match of May’s negatively-revised 0.6% decrease. The index recorded its fourth negative read in a row as consumer expectations, stock prices, jobless claims, average workweek, and ISM new orders were the biggest drags, more than offsetting gains for the interest rate spread, and credit conditions.

The Philly Fed Manufacturing Business Outlook Index unexpectedly fell further into contraction territory (a reading below zero) for July. The index dropped to -12.3 versus estimates of an increase to 0.8 from June’s -3.3 level.

Treasuries were higher, and the inversion of the 2-year and 10-year notes remains intact, with the markets grappling with an aggressive Fed to fight high inflation and what the ultimate impact will be on the economy.

©2022 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.