Stocks were little changed to slightly higher Friday afternoon, narrowly eking out record highs as investors digested a largely solid set of recent economic data and earnings results.
The S&P 500 and Dow set intraday highs, building on record levels from Thursday. The S&P 500 also closed at a record and posted a gain for the week. The index has risen for four straight sessions, continuing to make new highs as optimism over both the pace of the economic recovery and strength in corporate earnings results lingered.
Disney (DIS) shares jumped after the Dow component posted both revenue and earnings that topped expectations for its latest quarter, with growth at its closely watched Disney+ streaming platform holding up more robustly than anticipated. Airbnb (ABNB) shares fell, however, after the home rental company forecasted a drop in current-quarter bookings as the Delta variant weighs on travel. DoorDash (DASH) shares also fell, even after the company posted second-quarter sales and earnings that topped estimates as food delivery held up in the quarter.
For the broader economy, the data have been trending higher, albeit with some bumps along the way. Thursday's weekly report on new jobless claims showed a third straight weekly drop in new filings, albeit at a level still elevated compared to 2019 trends. And while Wednesday's inflation report on consumer prices was in-line with estimates, Thursday's print on producer prices exceeded estimates. The 7.8% increase in the producer price index on a year-over-year basis was the highest on record, in Labor Department data spanning back more than a decade.
"I think the current inflation prints we're seeing ... reflect mostly transitory things, and they would calm down on their own. But I do think that once those pandemic-specific effects have passed through, there is going to be some inflation that is above the Fed's comfort zone," Tom Graff, Brown Advisory head of fixed income, told Yahoo Finance. "I think they're going to be able to take control of it, I think they'll start tapering QE in [the fourth quarter] and probably wind up hiking late in 2022 or early in 2023. And then the question just becomes, how many hikes does it take? How high do interest rates need to go to get inflation back under control."
Meanwhile, a string of record closing highs for the major equity market indexes has left traders to ponder what might emerge as a catalyst to knock stocks off their upward trajectory. The S&P 500 has not seen a 5% pullback since October of last year, and is up nearly 19% so far for the year-to-date.
Still, some strategists suggested the path of least resistance remains up and to the right for stocks.
"Under the hood, so many companies have had a 10%, 14%, 15% retrenchment from peak to trough. So I’m not as concerned that the markets have been trending higher because there’s a few big names that hold it up," Kevin Simpson, Capital Wealth Planning founder and CEO, told Yahoo Finance. "There are so many companies that had pullbacks of magnitudes that we would consider correction territory."
"We're seeing markets show incredible resilience, and they continue to make new highs," he added. "I would expect some volatility – I don't know what the catalyst is. The Delta variant is the one staring us in the face as certainly the most obvious. And if we see a 10% pullback, which I'm not expecting, I would jump in and buy it with both feet."
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4:01 p.m. ET: Stocks eke out record close despite consumer confidence index letdown
1:26 p.m. ET: A record share of S&P 500 companies have topped earnings expectations: FactSet
A slew of stronger-than-expected second-quarter profit results among blue-chip companies has been a key driver of equity markets over the past several months.
To date, 91% of S&P 500 components have reported actual second-quarter earnings, with 87% of these having topped Wall Street's estimates, according to data from FactSet. Assuming this proportion holds through the end of earnings season, it would mark the greatest share of earnings beats ever recorded in FactSet data spanning back to 2008.
"Positive earnings surprises reported by companies in the Financials, Information Technology, and Communication Services sectors have been the largest contributors to the overall increase in earnings for the index since the end of the second quarter," FactSet's John Butters wrote in a note Friday.
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10:07 a.m. ET: Consumer sentiment unexpectedly tumbled in August as individuals reported a 'stunning loss of confidence' amid Delta variant: U. Michigan
The University of Michigan's closely watched Surveys of Consumers reflected a sharp drop in confidence in early August, with concerns over the pace of the economic recovery coming into question as the Delta variant spread.
The University of Michigan's headline sentiment index slumped to 70.2 in August from 81.2 in July, according to the preliminary monthly print. The level was only slightly below the April 2020 low of 71.8.
"Consumers reported a stunning loss of confidence in the first half of August," Richard Curtin, chief economist for the Surveys of Consumers, said in a press statement. "There is little doubt that the pandemic's resurgence due to the Delta variant has been met with a mixture of reason and emotion. Consumers have correctly reasoned that the economy's performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end."
" In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the Delta variant, shift toward outright optimism," he added.
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10:03 a.m. ET: 'It's unlikely that we're going to see tech outperformance near-term': Strategist
The continued moves to fresh all-time highs in the broader market belies an ongoing tug-of-war between cyclical and growth stocks under the surface, as investors weigh the lingering virus-related risks to the economy with signs that activity has picked up strongly.
"Our view is the recent rotation back into tech has gone too far, and we think it's unlikely that we're going to see tech outperformance near-term," Keith Lerner, chief market strategist at Truist Wealth, told Yahoo Finance. "The move up we've seen in tech, or the outperformance since May, was really sentiment-driven. Meaning, valuations expanded, but earnings compared to the broader market have actually been weaker as a whole."
"That doesn't mean there's not some select opportunities," he added. "But we like other areas such as financials and some of the economically sensitive areas that have actually underperformed in the last few months."
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9:54 am. ET: Virgin Galactic shares dip after founder Sir Richard Branson sells more than 10 million shares in the company
Shares of Virgin Galactic (SPCE) fell by 1% slightly Friday morning, underperforming against the broader market after founder Sir Richard Branson disclosed that he sold more than 10 million shares in the space tourism company.
According to a regulatory filing, Branson offloaded these shares between August 10 and 12 for a total of about $300 million. Branson's remaining stake is for around 46 million shares valued at $1.2 billion, based on Virgin Galactic's latest closing price.
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9:30 a.m. ET: Stocks open higher
Here's where markets were trading just after the opening bell on Friday:
8:58 a.m. ET: Import price growth decelerated in July
Prices for U.S. imports increased at a slower than expected rate in July, signaling that supply chain constraints may have begun to ease as the economic recovery continued.
Import prices rose 0.3% in July compared to June, Commerce Department data showed on Friday. This was well below the 0.6% rise expected, and slowed notably from June's 1.0% monthly increase. Still, import prices were up 10.2% compared to the same month last year, and they have increased on a monthly basis for nine consecutive months.
Much of the increase in overall prices came from energy-related imports, with energy prices rebounding as consumer mobility picked up and demand increased. Excluding petroleum, import prices were up by an even more tepid 0.1%, following a 0.7% rise in June.
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7:13 a.m. ET Friday: Stock futures point to a slightly higher open
Here's where markets were trading Friday morning:
S&P 500 futures (ES=F): +2 points (+0.04%) at 4,456.5
Dow futures (YM=F): +38 points (+0.11%) to 35,440.00
Nasdaq futures (NQ=F): +1.5 points (+0.01%) to 15,080.00
Here's where markets were trading Thursday evening:
S&P 500 futures (ES=F): -0.75 points (-0.02%) at 4,453.75
Dow futures (YM=F): +13 points (+0.04%) to 35,415.00
Nasdaq futures (NQ=F): -8 points (-0.05%) to 15,070.50
NEW YORK, NEW YORK - AUGUST 10: People walk by the New York Stock Exchange (NYSE) on August 10, 2021 in New York City. Markets were up in morning trading as investors look to a rare bipartisan effort in the Senate to pass a massive infrastructure bill that, if passed, will infuse billions into the American economy. (Photo by Spencer Platt/Getty Images) ·Spencer Platt via Getty Images
