The S&P 500 Index ($SPX) this morning is up +0.05%, the Dow Jones Industrials Index ($DOWI) is down -0.09%, and the Nasdaq 100 Index ($IUXX) is up +0.31%.
Mostly better-than-expected Q2 corporate quarterly earnings results are positive for stocks, with more than 86% of reporting S&P 500 companies having beaten expectations. However, today’s weaker-than-expected U.S. economic data is limiting gains in stocks.
Sep T-notes (ZNU21) this morning are up +3 ticks, and the 10-year T-note yield is down -1.8 bp at 1.270%. T-notes this morning are slightly higher on weaker-than-expected U.S. economic data.
However, supply pressures are a bearish factor for T-notes as the Treasury will auction $16 billion in 10-year TIPS later today.
The dollar index (DXY00) this morning is down -0.24%. The dollar is falling back today on weaker-than-expected U.S. economic data and slightly lower T-note yields. Also, strength in EUR/USD (^EURUSD) today is weighing on the dollar on upbeat comments from ECB President Lagarde. USD/JPY (^USDJPY) is down -0.19% in quiet trading, with Japanese markets closed today for a holiday.
August gold (GCQ21) this morning is down -2.50 (-0.14%), and Sep silver (SIU21) is down -0.070 (-0.28%). Precious metals this morning are modestly lower, with gold falling to a 1-1/2 week low. Gold prices this morning are slightly lower. Stronger stocks today are undercutting demand for gold as a safe haven. Silver prices are under pressure on weak U.S. economic data, which suggests reduced industrial metals demand. Gold saw support today from dovish comments from ECB President Lagarde that pressured bond yields.
Today’s U.S economic data was weaker than expected after weekly initial unemployment claims unexpectedly rose +51,000 to a 2-month high of 419,000, showing a weaker labor market than expectations of a decline to 350,000. Also, the Chicago Fed national activity index unexpectedly fell -0.17 to 0.09, weaker than expectations of an increase to 0.30. In addition, U.S. June existing home sales rose +1.4% m/m to 5.86 million, weaker than expectations for a rise to 5.90 million.
The ECB said today that it expects key interest rates to remain at their present or lower levels until it sees inflation reaching 2% "well ahead of its projection horizon, and durably for the rest of the projection horizon."
ECB President Lagarde said today that risks to the Eurozone outlook are "broadly balanced." She said in the near term, the significant slack in the economy is holding back inflationary pressures, and the medium-term inflation outlook is well below the ECB's goal. She added that inflation can't be below 2% for rates to rise.
Airline stocks are weaker today, led by a more than -2% fall in Southwest Airlines (LUV) after it reported a Q2 adjusted loss per share of -35%, wider than the consensus of -26 cents per share. Also, American Airlines Group (AAL) is down -1% today after it sounded a cautious note about Q3 when it forecast pretax margins in Q3 will be minus 3-7% in Q3 excluding special items. Alaska Air Group (ALK) and Delta Air Lines (DAL) are also down more than -1% today.
Homebuilders are moving lower today, led by a -4% fall in DR Horton (DHI) after the company reported Q3 purchase contracts fell -17% y/y to 17.952, weaker than the consensus of 22,385. PulteGroup (PHM) and Lennar (LEN) are also down more than -2%.
Texas Instruments (TXN) is down more than -5% today to lead losers in the S&P 500 after the company forecast Q3 revenue of $4.40 billion to $4.76 billion, the midpoint below the consensus of $4.59 billion.
Domino’s Pizza (DPZ) is up more than +8% today to lead gainers in the S&P 500 after the company reported Q2 adjusted EPS of $3.12, stronger than the consensus of $2.87.
The spread of the delta Covid variant worldwide has forced renewed lockdowns across parts of Asia and Australia and has sparked concern about a slowdown in global growth. The 7-day average of new U.S. Covid infections rose to a 2-1/2 month high Wednesday of 40,062. Also, the UK reported more than 54,000 new Covid infections on Saturday, the most since January.
The VIX S&P 500 Volatility Index ($VIX) this morning is up +0.24 at 18.15, well below Monday’s 2-month high of 25.09. The VIX is moderately above the 16-month low of 14.10 from June 29.
