The S&P 500 (-0.4%), Dow Jones Industrial Average (-0.4%), and Nasdaq Composite (-1.1%) ended the week in negative territory, more so the Nasdaq, after setting intraday and record highs to start the week. The Russell 2000 outperformed and gained 0.8%.
It was a busy week to say the least, from reviewing a ton of earning news, to scrutinizing the Fed’s latest policy decision, and sifting through the latest economic data and coronavirus headlines.
Starting with earnings, Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOG), and Facebook (FB), which comprise about 22% of the S&P 500’s market capitalization, struggled this week after soberly reminding investors that their incredible growth over the past year is apt to moderate.
Apple and Facebook issued cautious outlooks due to tough yr/yr comparisons while Amazon went as far as providing below-consensus revenue guidance for the third quarter. This fit nicely with the peak growth narrative, which was reinforced by mixed economic data and the continued spread of the Delta variant.
New home sales for June, durable goods orders for June, and the advance estimate for Q2 GDP each missed expectations. On the plus side, Q2 GDP still increased at a robust annual rate of 6.5%, the consumer confidence report for July was better than expected, and the Personal Income and Spending report for June featured better-than-expected spending data and better-than-feared PCE price inflation data.
Despite the mega-cap losses, the market hung in there, as the Fed made no changes to its extraordinarily accommodative policy stance. Fed Chair Powell took it one step further and said there’s still some time until substantial further progress has been made towards reaching the Fed’s employment goal.
Fed Chair Powell’s observation was conducive for risk sentiment, and while it may not have looked like it from an index perspective, seven of the 11 S&P 500 sectors did close in positive territory. The mega-caps pressured three of those sectors — consumer discretionary (-2.6%), communication services (-1.0%), and information technology (-0.7%).
The materials (+2.8%) and energy (+1.6%) sectors posted decent gains while the financials (+0.7%), health care (+0.5%), real estate (+0.3%), utilities (+0.3%), and consumer staples (+0.2%) sectors rose modestly.
The 10-yr yield decreased five basis points to 1.24%, underscoring peak growth/inflation expectations.
Week in perspective provided by Briefing.com