Global stock markets hit new record highs on Friday, boosted by forecast-beating corporate earnings, but the dollar and Treasury yields fell after data showed U.S. consumer confidence plummeted in early August.
The University of Michigan’s survey showed consumer confidence falling to its lowest level since 2011 in the first half of this month. The decline marked one of the six largest drops in the past 50 years of the survey.
The unexpectedly weak reading could give Federal Reserve policymakers reason to pause on a decision over whether to begin pulling back the extraordinary stimulus it put in place to shield the U.S. economy from the COVID-19 pandemic.
“The renewed plunge suggests the latest wave of virus cases driven by the Delta variant could be a bigger drag on the economy than we had thought,” said Andrew Hunter, an economist at Capital Economics.
Pandemic-era stimulus has been behind much of the surge in stock prices the past year, but massive corporate earnings have given the rally new legs in recent weeks.
“If we look at the earnings trajectory, it still lends a lot of support to the valuations in the market,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “Earnings season provided some comfort and stability.”
Canada’s main stock index finished flat on Friday as energy stocks decline, however it secured its fourth straight weekly gain on the back of a strong batch of corporate earnings.
The Toronto Stock Exchange’s S&P/TSX composite index was down 2.53 points, or 0.01%, at 20,518.07.
The energy sector dropped 1.4% as oil fell on Friday, but was on track to post a slight weekly gain, broadly shrugging off a warning from the International Energy Agency that the spread of coronavirus variants is slowing oil demand.
U.S. crude futures settled at $68.44 per barrel, down 65 cents or 0.94%. Brent crude futures settled at $70.59 per barrel, down 72 cents or 1%.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 1.4% as gold rose more than 1% as tapering concerns eased.
Spot gold added 1.5% to $1,777.91 an ounce. U.S. gold futures settled 1.5% up at $1,778.20.
Producer prices in Canada most likely rose by 0.1% in July from June, led mainly by higher prices for energy and petroleum products, and chemicals and chemical products, Statistics Canada said.
U.S. stocks held near the unchanged mark on Friday and notched a second straight week of gains, as a climb in Walt Disney shares boosted the Dow Industrials and S&P 500 but a sharp drop in consumer sentiment kept the investor optimism in check.
Walt Disney rose in one of the biggest boosts to both the Dow and benchmark S&P after its profit topped market expectations as its streaming services added more customers than expected and its pandemic-hit U.S. theme parks returned to profitability.
But a report from the University of Michigan dented optimism after it showed the university’s preliminary consumer sentiment index fell to 70.2, its lowest level in a decade, suggesting that the Delta variant of the coronavirus was impacting consumers.
“That is concerning, the consumer is by all accounts in an extremely strong position but there is this kind of COVID fatigue that is really starting to wear on people’s sentiment,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.
“Regardless of lockdown or full reopen, the consumer is healthy enough to spend and kind of keep the economy afloat, it will be different names and different sectors that become the beneficiaries of it.”
The report sent the yield on the 10-year U.S. Treasury note lower and in turn helped lift mega-cap growth names, such as Microsoft Corp, while online retail giant Amazon slipped.
Unofficially, the Dow Jones Industrial Average rose 13.22 points, or 0.04%, to 35,513.07, the S&P 500 gained 6.91 points, or 0.15%, to 4,467.74 and the Nasdaq Composite added 6.02 points, or 0.04%, to 14,822.29.
U.S. stocks have managed to slowly grind to new highs over the past few sessions as investor confidence in economic recovery was bolstered by a strong earnings season, the passage of a large infrastructure bill and data showing inflation may be increasing at a slower pace than feared.
In the wake of new data from earlier this week that showed consumer price increases slowed in July, while producer prices posted their biggest annual rise in more than a decade, investors are now looking ahead to the meeting of central bankers in Jackson Hole, Wyoming, later this month for cues on policy.
In recent days, several Fed officials said it is nearly time for the central bank to begin pulling back on its monetary support, including the tapering of its asset purchases.
DoorDash Inc rose, reversing earlier losses after the food-delivery firm’s loss widened more than expected in the second quarter.
Airbnb Inc slipped after it flagged a hit to its current-quarter bookings by the Delta variant and a slowing pace of U.S. vaccination.
The MSCI world equity index, which tracks shares in 50 countries, hit a fresh record high.
MSCI’s gauge of stocks across the globe gained 0.13%.
European stocks scaled new highs and clocked their fourth consecutive week of gains on optimism over a strong earnings season and steady recovery from the pandemic-led economic downturn.
The pan-European STOXX 600 index inched up 0.2% to a record high of 476.16, for the tenth straight session. The index has now matched its best winning streak since December 2006.
Not everyone is convinced the rally can continue, however.
“We feel a bit more cautious headed into autumn because of uncertainty on the health front, the Chinese regulatory front and the monetary policy front,” said Paul O’Connor, head of multi-asset at Janus Henderson.
The dollar and U.S. benchmark 10-year Treasury yields weakened after the consumer confidence survey, bolstering gold’s appeal.
The dollar index fell 0.491%, with the euro up 0.56% to $1.1793.
Benchmark 10-year notes last rose 21/32 in price to yield 1.2985%, from 1.367% late on Thursday.
Worries about a regulatory crackdown in China and a surge in the COVID-19 Delta variant have sapped confidence in Asia, where markets mostly declined.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.56%, and was 0.8% lower for the week.
Chinese blue chips weakened 0.55%, dragged down by its local semiconductor sub-index, which slumped 4.1%.
Reuters
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