U.S. stock indexes relinquished solid gains Monday and stocks ended mostly lower as persistent concerns about the spread of the delta variant of the coronavirus that causes COVID-19 created an excuse for modest selling in the first trading day for equity markets in August.
Investors also eyed progress on an infrastructure bill, merger activity and concerns about the pace and timing of the Fed’s plans to roll back easy-money policies.
How major stock indexes traded?
The Dow Jones Industrial Average
fell 97.31 points, or 0.3%, to 34,838.16, after touching an intraday high at 35,192.11.
The S&P 500 index
traded down 8.10 points, or 0.2%, to 4,387.16, but had touched a Monday peak at 4,422.18.
The Nasdaq Composite Index
gained 8.39 points, or 0.06%, higher to close at 14,681.07, but had reached a intraday peak at 14,770.41.
Last week, the major indexes dropped, with the S&P 500 losing 0.4% and Nasdaq Composite dropping 1.1%, after the megacap tech companies reported quarterly results. The Dow fell 0.4% last week. The S&P 500 rose 2.3% in August, for its sixth consecutive monthly gain.
What drove the market?
Stocks saw choppy trade with the start of the action in August, a seasonally tough time for equities, living up to its billing.
“Some of the [turbulence] is being near all-time highs,” JJ Kinahan, chief market strategist at TD Ameritrade, told MarketWatch in a phone interview.
Concerns about the spread of the delta variant of COVID-19 caused some caution on Wall Street, with the 10-year benchmark TreasuryBX:TMUBMUSD10Y at multimonth lows below 1.15%, casting a pall over markets. Those worries combined with increasing jitters about the outlook for economic and corporate growth are being parsed by investors.
Meanwhile, Fed Gov. Christopher Waller told CNBC in an interview Monday afternoon that the central bank should look to taper the Fed’s $120 billion a month in asset purchases early and that “we should go fast,” to give policy makers sufficient ammunition to raise rates in 2022 if they need to curb an overheated economy.
Waller’s remarks come after Fed Gov. Lael Brainard, in a speech delivered Friday night, indicated that she doesn’t think the central bank would be prepared announce a tapering of its bond purchase program at the Jackson Hole gathering at the end of the month. “I expect to be more confident in assessing the rate of progress once we have data in hand for September, when consumption, school, and work patterns should be settling into a post pandemic normal,” she said.
Initially, the markets had started the dog days of summer on a bullish note, supported by some confidence in the economic expansion and strength in corporate profits.
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“Earnings season is largely over, and [with] the [Federal Open Market Committee] meeting and GDP behind us, markets enter a difficult seasonal period with few catalysts to drive markets higher,” wrote Mark Hackett, Nationwide’s chief of investment research.
“The bond market continues to reflect peak growth and a potential Fed policy error,” he noted.
Investors also are keeping a close eye on China’s efforts to rein in tech firms domiciled in the People’s Republic.
“The stars have aligned for stock markets, with a stellar earnings season being complemented by record-low real yields and hopes that Congress will deliver more fiscal juice soon,” said Marios Hadjikyriacos, senior investment analyst at XM. U.S. senators over the weekend concluded the text of a $1 trillion infrastructure bill.
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Looking ahead, the September jobs data won’t come until Oct. 8, according to the Labor Department’s calendar of releases, and the next Federal Open Market Committee meeting after that will end Nov. 3.
Meanwhile, a manufacturing survey from the Institute for Supply Management falls to 59.5 in July from 60.6, with the index falling to a 6-month low due to broad supply shortages.
“The ISM manufacturing index stayed well within expansion territory at 59.5 in July—but signals that manufacturing sector growth likely peaked earlier this year,” wrote Oren Klachkin and Gregory Daco, economists at Oxford Economics, in a note.
“Significant supply side challenges remained prevalent as supplier deliveries slowed further and input prices rose at a red-hot pace,” the economists wrote.
The closely followed report comes after IHS Markit’s final reading for manufacturing PMIs in July was 63.4 versus an initial read of 63.1. A reading of 50 or above indicates improving conditions.
A separate report on U.S. construction spending was up 0.1% in June.
Which companies were in focus?
In deal news, Square Inc.
is buying Australia-listed buy-now pay-later company Afterpay Ltd.
for $29 billion in an all-stock deal. Square shares were up 10.2%.
Parker Hannifin Corp.
said it’s buying U.K. engineering company Meggitt PLC
for $9 billion in cash, a 71% premium to Friday’s close. Shares of Parker Hannifin closed down 2.1%.
announced Monday an agreement to buy Oil Price Information Service (OPIS) for $1.15 billion in cash, from S&P Global Inc.
and IHS Markit Ltd.
News Corp is the parent of Dow Jones and MarketWatch, the publisher of this report. Shares of News Corp. finished up by about 0.6%, those for S&P Global were up 1.3% and IHS Markit shares were up by about 1%.
How are other markets fared
- The yield on the 10-year Treasury note traded down 6.6 basis points at 1.173%. Yields and debt prices move in opposite directions.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was off 0.2%.
Oil futures lost ground, with the U.S. benchmark
down $2.69, or 3.6%, to close at $71.26 a barrel on the New York Mercantile Exchange, while gold futures
rose $5, or 0.3%, to close at $1,822.20 an ounce.
In European equities, the Stoxx Europe 600
closed up 0.6% to notch a record high, while London’s FTSE 100
In Asia, the Shanghai Composite
jumped 2%, while the Hang Seng Index
rose 1.1% in Hong Kong. Japan’s Nikkei 225