By Yasin Ebrahim
Investing.com – The S&P 500 snapped a three-week winning streak Friday as an unexpected rebound in retail sales pointing to a stronger consumer, and better-than-expected earnings this week were largely cast aside.
The S&P 500 fell 0.75%, the Dow Jones Industrial Average slipped 0.86%, or 299 points, the Nasdaq fell 0.80%.
The Commerce Department said Friday that retail sales rose 0.6% last month. That confounded economists’ forecast for a 0.3% decline. The retail sales control group – which has a larger impact on U.S. GDP – climbed 1.1%, well ahead of expectations for a 0.4% rise.
The data suggest “the consumer is still alive and kicking, and while spending is certainly shifting to services, this is not inducing steep declines in goods demand,” Jefferies (NYSE:JEF) said. “As for inflation, aside from a few categories (notably autos), surging prices are not deterring consumers just yet.”
Signs that the consumer, which contributes two-thirds of economic growth, continues to spend failed to spark a bid in cyclicals.
Energy led the move lower as oil prices added to losses this week for their biggest weekly loss since May. Oil prices have been on the back foot amid fears major oil producers are set to increase output following a deal by Saudi Arabia and United Arab Emirates earlier this week.
But some suggest that oil demand will continue to outstrip supply. “Even if one factors in the OPEC+ production hike planned in July, this leaves a substantial supply deficit that OPEC+ would need to offset by further expanding production,” Commerzbank (DE:CBKG) said in a note.
Health care stocks, health stocks were in the ascendency, led by a rally in Moderna .
Moderna Inc (NASDAQ:MRNA) jumped 10% on news that the stock would be included in the S&P 500 as of July 21st.
BioNTech SE (NASDAQ:BNTX), meanwhile, was up more than 4% after the U.S. Food and Drug Administration has granted priority review of the biologics license application of their mRNA Covid-19 vaccine in patients aged 16 years and older.
The bid in big tech seen earlier this week continued to fade, with the Fab 5 closing in the red.
Microsoft (NASDAQ:MSFT, Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Amazon.com (NASDAQ:AMZN) were lower.
Sentiment on stocks this week has also been soured following a resurgence in Covid-19 infections, brought on by the Delta variant.
“After weeks of declines, seven day average daily deaths have increased by 26% to 211 per day,” said Dr. Rochelle Walensky, the director of the Centers for Disease Control and Prevention during a press briefing Friday.
The gloomy end to the week on Wall Street comes even as the quarterly earnings season got off to an upbeat start.
"Overall, 8% of the companies in the S&P 500 have reported actual results for Q2 2021 to date. Of these companies, 85% have reported actual EPS above estimates, which is above the five-year average of 75%," according to FactSet.