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Stocks, yields slip as investors await next catalyst

EconomyJul 15, 2021 04:52PM ET
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2/2 © Reuters. FILE PHOTO: A Stock Exchange of Hong Kong (HKEX) logo in Beijing, China September 4, 2020. REUTERS/Tingshu Wang 2/2

By Herbert Lash and Marc Jones

NEW YORK/LONDON (Reuters) - A measure of global equity markets slid from near record highs, the dollar edged up and bond yields fell on Thursday as investors mulled the Federal Reserve's benign inflation outlook and upbeat assessment of the U.S. economy.

The number of Americans filing new claims for unemployment benefits fell to a 16-month low last week as the U.S. labor market steadily gains traction while other data showed import prices rose solidly in June but have probably peaked.

Wall Street traded lower even as the four largest U.S. consumer banks posted blockbuster second-quarter results earlier this week that were above analysts' estimates.

Investors are looking for visibility into future earnings as stocks have already surged in anticipation of stellar growth.

"We had the rally going into the earnings season. Now that we're actually here, we're seeing some softness. I wouldn't be surprised if we don't see a lot of strength during this reporting season," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Analysts expect strong earnings, with IBES data from Refinitiv showing consensus looking for a 65.8% gain from a year ago, making corporate guidance more important than results.

'NAME OF THE GAME'

Energy and technology stocks led the decline on Wall Street, with defensive consumer staples and utilities the only two of 11 S&P 500 sectors to gain. Staples have pricing power that could help Procter & Gamble (NYSE:PG) Co, Coca-Cola (NYSE:KO) Co and others rise, once it is clear their margins remain intact, said Tom Hayes, founder and managing member of Great Hill Capital LLC.

"Guidance is the name of the game. A lot of good news is already baked into the market and even with strong guidance, you may get a breather here," Hayes said.

The MSCI world equity index, which tracks shares in 50 countries, closed down 0.33% to 723.66 after touching a record high on Wednesday. Europe's broad FTSEurofirst 300 index closed down 0.92% at 1,761.30, less than 20 points from an all-time peak set Monday.

Losses in Europe were broad-based, with economically sensitive stocks such as banks, automakers and travel down between 0.3% and 1.6% as investors grew wary of rising COVID-19 cases and their potential economic impact.

Official data showed that the United Kingdom reported the highest daily increase in COVID-19 cases since Jan. 15.

On Wall Street, the Dow Jones Industrial Average eked out a 0.15% gain but the S&P 500 fell 0.33% and the Nasdaq Composite slid 0.70%.

Shares in emerging markets rose, bucking the global trend, with MSCI's index gaining 0.77%.

The 10-year Treasury note fell 5.9 basis points to yield 1.2972%, while the dollar index, which tracks a basket of six currencies, rose 0.19% to 92.586.

The rally in U.S. and European bond prices, which show the inverse of yields, suggested growing investor caution.

The dollar has climbed in recent weeks as investors take stock of the Fed's increasingly upbeat assessment of the U.S. economy, which for some investors has brought forward the timeframe for its next rate rise. Rates have fallen on Japanese buying and investors selling long-dated maturities for shorter-duration government debt, which has pushed prices up.

The euro fell 0.21% at $1.1810, while the yen traded slid 0.18% at $109.7900.

Oil prices fell as investors braced for increased supplies after a compromise agreement between leading OPEC producers and after a surprisingly low weekly reading on U.S. fuel demand.

Brent crude fell $1.29 to settle at $73.47 a barrel, while U.S. crude slid $1.48 to $71.65 a barrel.

Gold hit a one-month peak, spurred by Federal Reserve Chair Jerome Powell's dovish comments that squashed market interest rates.

U.S. gold futures gained 0.3% to $1,830.00 an ounce.

COVID-19 VARIANT FEARS

China's economic data showed average growth surpassed the first quarter, while June retail sales and industrial output beat expectations. But it also showed authorities, which only last week injected 1 trillion yuan into the financial system, will ensure that conditions stay loose.

The World Health Organization (WHO) COVID-19 dashboard reported the first weekly rise in global deaths from the virus in 10 weeks and a 5.6% jump in daily case numbers on Wednesday.

"The market is fearing the Delta variant could take a hold of different economies so you are almost seeing that we are back to the 'bond yields lower, tech doing well' scenario," said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

The likes of Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL) are up 6-8% this month, while China's biggest tech firms Alibaba (NYSE:BABA) and Tencent have surged more than 12% since China's central bank made a supportive policy tweak for the first time in nearly a year on Friday.

The spread of COVID-19 variants of concern: https://tmsnrt.rs/3hYU08J

The Chinese yuan dipped to 6.4628 per dollar in Asia after hitting a three-week high of 6.4508 overnight.

MajorFx: https://tmsnrt.rs/2UEB6Mp

Stocks, yields slip as investors await next catalyst
 

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Comments (11)
Tyrone Jackson
Tyrone Jackson Jul 15, 2021 7:37PM ET
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Biden’s scheme of 3 Trillion dollars is going to destroy the dollar. The dx is going up, but once the reality sits in, the Dx will be dropping hard . As gold goes to 2700-2900
Offishal Alex
Offishal Alex Jul 15, 2021 12:55PM ET
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that is the only truth
nikhil nirmal
nikhil nirmal Jul 15, 2021 12:55PM ET
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yes
Kelly Mayer
Kelly Mayer Jul 15, 2021 9:11AM ET
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Who declared start of third wave, wiping of vaccine progress. Why do you think Warren Buffet donated half his shares to foundations and Bill Gates had this divorce going where he gave away so many shares to his ex wife? This is how you avoid being taxed when you want to sell your shares. Third wave is likely to cause a recession now, specially due to the censoring of c19early.com data.
Byedin Youlost
Byedin Youlost Jul 15, 2021 2:47AM ET
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Green at the opening. THANK YOU MR PRESIDENT TRUMP
Hunt Richardson
Hunt Richardson Jul 15, 2021 2:39AM ET
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what was that about "fear" in the headline? oh, $expectations"and "estimates". typical Reuters exaggeration to grab attention. Stop doing fhat!
Franco Dominguez
Franco Dominguez Jul 15, 2021 1:45AM ET
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elder is overheat the market to never return, hike the exchange rate to 0.25 isnt a extraordinary number and get order
Jon Bal
Jon Bal Jul 14, 2021 11:56PM ET
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+5 points for title creativity...how are you doing today? ..."I'm better than feared, thank you"
Todd Gray
Todd Gray Jul 14, 2021 11:47PM ET
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I've lived through a good number of market crashes. Preceding every one of them, the FED repeatedly stated every thing was rosy, even after the markets started to crash. From what I read, it's the monetization of massive federal debt that's the real inflation problem. That's not going away any time soon. And, historically inflation is always transitory; everybody gets use to the new higher prices. then they make the rich richer for another ten years, and then inflation kicks up again, so we subsidize the riches made in the last 10 years with more inflation. our politicians are to corrupt to clean up this country.
trevor hron
trevor hron Jul 14, 2021 11:47PM ET
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Aint that the truth. What a mess we are in. It’s going to get crazy.
Joel Schwartz
Joel Schwartz Jul 14, 2021 11:46PM ET
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The FED’s printer is about to cause 100x more problems than it ever solved.
trevor hron
trevor hron Jul 14, 2021 11:46PM ET
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That’s definitely the Truth.
Matt Kay
Matt Kay Jul 14, 2021 11:46PM ET
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For the poor. Should have been born rich, looser
James Andrews
James Andrews Jul 14, 2021 10:28PM ET
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Just wait..
William Bailey
William Bailey Jul 14, 2021 10:27PM ET
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Shrugging off a locamotive while standing in the train tracks is a bad move
trevor hron
trevor hron Jul 14, 2021 10:27PM ET
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Yeah can’t get much worse than that
 
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