S&P 500, Dow Dive Amid Lower Oil Prices As Virus Concerns Rise
Stocks fell on Monday, losing momentum after hitting all-time highs late last week. Commodity prices fell as concerns over the spread of the coronavirus resurfaced, with crude oil prices trending sharply lower.
The S&P 500 fell as shares of oil companies such as Occidental Petroleum (OXY), Apache Corporation (APA) and Diamondback Energy (FANG) fell. The Dow Jones also fell, weighed down by a drop in Chevron shares (CVX).
West Texas Intermediate Crude Oil Futures (CL = F) fell more than 4% from Monday morning session low to hover around $ 65 a barrel, extending further weekly decline 7.5% last week. Brent crude (BZ = F), the international standard, also fell. Other commodities also fell on Monday morning, including copper, silver and gold futures contracts each down at least 1%. T-bill yields fell across the curve and the benchmark 10-year yield fell below 1.28%.
The moves came amid growing concerns over coronavirus infection rates and new restrictions in China, a major demand center for global commodities.
The world’s second-largest economy has put new measures in place, including flight cancellations and other travel restrictions in some of the hardest-hit areas of the country, in an attempt to limit the spread of the virus. China’s National Health Commission last confirmed 125 new infections from Sunday, against 96 the day before.
“The virus count is still very low compared to other countries. But the spread of the Delta variant challenges China’s ‘zero-COVID’ approach. As most governments are now starting to recognize that we will probably have to live with the coronavirus for the long term, China’s ambition remains to keep it completely out of the country, ”wrote Neil Shearing, group chief economist for Capital Economics, in a note Monday morning.
“Without a change in approach, this suggests that China will have to continue with occasional local blockades and restrictions on movement,” he added. “This in turn will prevent a complete return to pre-pandemic consumer and business standards of behavior, and it will likely mean that restrictions on overseas travel will remain in place for some time to come.”
Concerns about the Delta variant have also been evident in quarterly profit calls for a multitude of large companies, raising the specter of another deceleration in consumer spending on services. Booking Holdings (BKNG) CEO Glenn Fogel said last week that the increase in the number of COVID cases and the newly imposed travel restrictions “led to a slight decline” in travel booking trends in July by report to June. Likewise, Lumber Liquidator Holdings (LL) suggested investors “forecast a slowdown in comparable sales” as the home improvement retailer operates on potential shifts in consumer demand and the potential impact of the delta variant of the. COVID-19, “CFO Nancy Walsh said at the company’s earnings call meeting last week.
Nonetheless, a number of economists have nonetheless pointed to the continued strength of the economic recovery in the United States, even as new risks around the virus emerge. The US economy created more than 900,000 jobs in July and June, according to Friday’s employment report, and separate surveys of manufacturing and service sector activity indicated continued expansion.
The results of US companies, on the whole, have also been strong. 89% of S&P 500 companies had released second quarter results on Friday, 87% of them beating Wall Street estimates for earnings per share, according to FactSet data. If this proportion holds, it would be the highest percentage of S&P 500 companies topping earnings estimates since at least 2008.
The quarterly earnings season continues this week with companies from Coinbase (COIN) to Disney (DIS) releasing their results.
11:23 a.m.ET: Consumer inflation expectations hold high in July: New York Fed
Inflation expectations among U.S. consumers remained at an all-time high in July, with the supply chain and lingering labor constraints pushing up price hike expectations.
At the median, consumers expect inflation to rise 4.8% over the next year, according to the New York Federal Reserve’s monthly survey. This matched the June reading, which was the highest level in survey history.
Over the next three years, consumers expect inflation to rise 3.7%, up slightly from June’s impression of 3.6% and hitting the fastest pace expected since 2013. Expectations for house price increases, however, have moderated to a 6.0% increase over the next year, down slightly from the 6.2% seen in June.
11:07 am ET: Growth and value stocks are “neck and neck so far this year”: strategist
Despite Monday’s pullback, the S&P 500 is still hovering near an all-time high, fueled by optimism about the economic recovery and rebounding corporate earnings.
Beneath the surface, however, a back-and-forth has occurred in leadership between growth tech stocks and value stocks, especially in cyclical areas like energy and financials.
“Growth and value are actually neck and neck so far this year,” Emily Roland, Co-Chief Investment Strategist at John Hancock Investment Management, told Yahoo Finance. “We’ve seen these huge changes. A lot of times it’s been tied to rates: so of course the idea that as rates go up it benefits more cyclical parts of the market, especially financials, which will increase the value complex And then when rates fall, reflecting a more subdued growth environment, it usually rewards growth, or parts of the market that have longer term cash flows that are discounted at a lower rate . ”
“There is this great schism that seems to have opened up between growth and value investors. I’m here to tell you that they can live together,” she added. “We want to embrace both in this market. Again, that quality factor will be more on the growth side of the house… but we want to have the offense of playing on the cyclical recovery that continues to occur here in the States. -United”
10 a.m. ET: Job postings hit an all-time high in June, surpassing 10 million
Jobs in the United States reached an all-time high in June, further underscoring the magnitude of labor and demand shortages that continue to weigh on the overall pace of economic recovery.
The Ministry of Labor’s monthly job openings and turnover report showed openings increased to 10.1 million in June. Consensus economists were looking for just under 9.3 million, according to Bloomberg data. May’s job postings were also revised up to nearly 9.5 million, from the 9.2 million previously reported.
The largest increases in job openings were in professional and business services with 227,000. Other areas of the service economy also posted high levels of job vacancies, with vacancies being posted. employment in retail and food services each to more than 120,000 at the end of June.
The layoff rate was unchanged in June compared to May at 0.9%, which marked the lowest level on record.
9:32 a.m. ET: Stocks drop as commodity prices drop
Here’s where the markets were trading shortly after the opening bell:
S&P 500 (^ GSPC): -3.24 (-0.07%) to 4,433.28
Dow (^ DJI): -80.15 (-0.23%) to 35,128.36
Nasdaq (^ IXIC): +8.37 (+ 0.02%) to 14,837.80
Raw (CL = F): $ -1.79 (-2.62%) to $ 66.49 per barrel
Gold (CG = F):-$ 18.90 (-1.07%) to $ 1,744.20 per ounce
10-year cash flow (^ TNX): -1.6 bps for a yield of 1.272%
7:11 a.m. ET Monday: Trading in equity futures is mixed
Here’s where the markets were trading on Monday morning:
S&P 500 Futures Contracts (ES = F): -6.25 points (-0.14%) to 4,423.25
Dow Futures (YM = F): -104.00 points (-0.3%) to 34,987.00
Nasdaq Futures (NQ = F): +25.25 points (+ 0.17%) to 15 120.75
Raw (CL = F): -2.75 $ (-4.03%) to 65.53 $ per barrel
Gold (CG = F):-$ 12.90 (-0.73%) to $ 1,750.20 per ounce
10-year cash flow (^ TNX): -0.6 bps for a yield of 1.282%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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