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Stock Market News for Aug 2, 2021

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Benchmarks closed in the red on Friday, with renewed concerns revolving around the increase in coronavirus cases especially due to delta variant and a disappointing Q2 earnings report from Amazon. All the major indexes posted a weekly decline, however, they edged up for the month of July.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 149.06 points, or 0.4%, to close at 34,935.47. The blue-chip index touched an intraday high of 35,106.30. Among the Dow’s biggest decliners were Caterpillar Inc. (CAT - Free Report) , The Boeing Company (BA - Free Report) and The Walt Disney Company (DIS - Free Report) that closed 2.7%, 2.2% and 1.3% lower on Friday. Caterpillar holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 fell 23.89 points, or 0.5%, to end the session at 4,395.26 on Friday. Of the 11 major sectors of the broader index, seven ended in the red with the consumer discretionary and energy sectors closing 2.8% and 1.8% lower, respectively for the session.

The Nasdaq Composite Index closed at 14,672.68, after declining 105.59 points, or 0.7%. Amazon.com, Inc. (AMZN - Free Report) and eBay Inc.’s (EBAY - Free Report) more than 7% decline pushed the tech-laden index lower and overshadowed 21.9% gain in Atlassian Corporation Plc (TEAM - Free Report) and 13% jump in DexCom, Inc. (DXCM - Free Report) . Other tech bigwigs like Facebook, Inc. (FB - Free Report) and Microsoft Corporation (MSFT - Free Report) also closed 0.6% lower for the session.

On Friday, the fear-gauge CBOE Volatility Index (VIX) increased 3.1%, to close at 18.24. Declining issues outnumbered advancing ones for 1.43-to-1 ratio on the NYSE, while a 1.58-to-1 ratio on the Nasdaq favored decliners. The S&P 500 posted 65 new 52-week highs and two new lows, while the Nasdaq Composite recorded 84 new highs and 98 new lows. A total of 8.86 billion shares were traded on the last trading session, lower than the last 20-session average of 9.74 billion.

Amazon Falls Short of Analysts’ Estimates

Amazon reported its first revenue miss in the last three years and also gave a weak third-quarter 2021 guidance. Amazon reported second-quarter 2021 earnings of $15.12 per share, beating the Zacks Consensus Estimate by 23.7%. However, it reported net sales of $113.1 billion, missing the Zacks Consensus Estimate of $115.1 billion. The guidance for the next quarter echoes deacceleration in revenue growth rates from pandemic highs. (Read More)

Economic Data Log

On Jul 30, the government reported that personal income rose 0.1% in June, surpassing the consensus estimate of 0.3% loss and a rebound from May’s downwardly revised figure of 2.2% decline. While personal spending edged up 1%, beating the consensus estimate of a 0.8% rise in June. May’s figure was downwardly revised to a 0.1% decline. Disposable Personal Income (DPI) came in unchanged for June after being downwardly revised to a 2.7% decline in the prior month.

Key inflation indicator, personal consumption expenditures (PCE) price index rose 0.5% in June. Inflation has been rising sharply over the past year and remained at a 13-year high, raising the cost of living and overshadowing a strong economic recovery. Lack in business supplies especially computer chips has driven prices higher. The core PCE price index, which strips out volatile food and energy prices rose 0.4% in June, climbed to the highest level since 1992. PCE has now moved up to 3.5% over the past 12 months.

In a separate report, the University of Michigan reported that its consumer-sentiment index fell to 81.2 in July from a reading of 85.5 in June, however it exceeded the initial July figure of 80.8. Growing concerns over higher inflation and Delta variant spread weighed on sentiment in July. Consumers have shown pessimism over purchasing housing, vehicles, and other household durables due to higher prices.

Second Quarter Earnings Roll On

As of Jul 30, 296 S&P 500 members or 59.3% of the index’s total membership have reported second-quarter earnings. Total earnings for these companies are up 102% from the same period last year with 26.8% higher revenues, along with 89.2% beating EPS estimates and a record 87.5% beating revenue estimates. (Read More

On Friday, Exxon Mobil Corporation (XOM - Free Report) reported second-quarter 2021 earnings per share of $1.10, beating the Zacks Consensus Estimate of $1.02. However, shares failed to move up and closed 2.3% lower instead. The strong quarterly results were due to improved realized oil and natural gas prices as well as higher chemical margins. But downstream business suffered due to planned maintenance and unfavorable foreign exchange. Exxon Mobil reaffirmed its expectation for 2021 capital spending at $16-$19 billion. (Read More)

Another oil and gas giant, Chevron Corporation (CVX - Free Report) reported second-quarter 2021 earnings. Chevron reported $1.71 earnings per share for the quarter, beating the Zacks Consensus Estimate of $1.54, owing to higher oil prices and production, plus increase in refined products sales. (Read More)

Caterpillar also reported second-quarter 2021 earnings on Friday. An adjusted earnings per share of $2.60, which surpassed the Zacks Consensus Estimate of $2.38, due to higher demand in end markets and across all geographies, which in turn countered inflated input costs. The company’s second-quarter revenues of $12.9 billion surpassed the Zacks Consensus Estimate of $12.4 billion, a 29% improvement from the year-ago quarter. (Read More)

Monthly Roundup

For the month of July, the Dow, the S&P 500 and the Nasdaq rose 1.3%, 2.3% and 1.2 % respectively. The broader index notched its sixth consecutive monthly gain. Investors have been hooked on second quarter earnings report and kept a close watch on the rise in new coronavirus cases, due to the highly communicable delta strain, risking the reopening of the economy

Weekly Roundup

For the week ending Jul 30, the DOW, the S&P 500 and the Nasdaq closed 0.4%, 0.6% and 1.1% lower, respectively. A series of economic data, second-quarter earnings reports, and the Federal Reserve’s policy statement gave stocks a roller coaster ride last week.