Stocks Close Mostly Down Despite Strong Earnings, Futures Mixed

16 Jul 2021 · 3rd Party Analysis

Stocks Close Mostly Down Despite Strong Earnings, Futures Mixed


In Summary

  • Equities on Wall Street struggled to gain traction even as earnings arrived better than expected
  • US futures on Friday trade mixed ahead of the opening bell in New York

Wall Street stocks ended Thursday’s session mostly lower even as second-quarter earnings results continued to top estimates. The S&P500 slipped 0.33%, or 14.27 points, to 4,360.03. The tech-focused Nasdaq Composite shed 0.70%, or 101.82 points, to a close of 14,543.13. The Dow Jones Industrial Average was the only winner. The blue-chip 30-stock benchmark hovered near the flatline most of the day but closed moderately higher, up 0.15%, or 53.79 points, to 34,987.02.

As the earnings season gathers pace, Morgan Stanley’s second-quarter financial results arrived better than expected. The investment firm reported a profit of $3.51bn on revenue of $14.76bn. The results exceeded the consensus estimates on revenue of $13.97bn.

Morgan Stanley joined other large banking firms that reported blowout earnings this week. The improved business climate in the second quarter, boosted by the economic reopening, has resulted in a strong increase in deal-making for the biggest US lenders. Goldman Sachs, Citigroup, JPMorgan, and Wells Fargo were among the firms that delivered robust growth numbers for the second quarter, underpinned by America’s rapid rebound.

Delta Strain Impacts European Markets

Meanwhile, Federal Reserve Chairman Jerome Powell on Thursday reaffirmed the central bank’s view on the economy and the surge in inflation. In his second day of testimony before Congress, Mr. Powell spoke before the Senate banking panel. Chairman Powell said the Federal Reserve remained committed to its monetary policy as it continued to evaluate the economic recovery.

“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected or that anybody had expected,” Mr. Powell told Congress. “To the extent that it is temporary, then it wouldn’t be appropriate to react to that. But to the extent that it gets longer and longer, we’ll have to continue to reevaluate the risks that would affect inflation expectations and would be of longer duration and that’s what we’re monitoring,” he also added.

Mr. Powell’s second appearance before Congress followed his opening testimony on Wednesday before the House Committee on Financial Services. Speaking to lawmakers yesterday, the Fed Chair reiterated Fed officials will wait until unemployment levels improve before changing the Fed’s approach to the economy.

The Fed chief also said he believed inflation to be temporary and caused by factors related to the quick reopening after the pandemic. Once these factors fade, according to the central bank chief, inflation would moderate to lower levels.

On the economic front, the Labor Department yesterday said weekly applications for unemployment benefits fell to a new pandemic low, signaling the economy continues to recover. Jobless claims declined to 360,000 in the week ended July 10. The four-week average that smooths out weekly volatility also dropped to a new pandemic bottom of 382,500.

Futures contracts tied to the major benchmarks today float mixed between gains and losses.

Overseas, the European market on Friday opened relatively subdued. Bourses across Europe continued their choppy trading as investors are trying to assess Delta strain risks and higher inflation pressures. Later today, inflation data for the eurozone is expected to create higher volatility.

Bitcoin remains under pressure on Friday as the cryptocurrency market is still producing weak trading volumes. The world’s biggest digital currency is now gravitating toward $32,000, down about 6% on the week.

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