Inflation fears and the growing threat of the Covid-19 delta variant overshadowed strong retail sales data and better than expected earnings reports as the Dow fell after touching 35000 on the day.
U.S. indices finish the week in the red
The Dow lost nearly 300 points to close down at: 34688
S&P 500 closed down at: 4327
Nasdaq closed down at: 14427
The market had an eye on inflation even though the S&P 500 and Dow did touch record highs during the week. The consumer price index (CPI) showed a 5.4% increase in June from a year ago, the highest in 13 years.
Energy stocks fell into correction territory on Friday as oil prices pulled back from their highs. Weaker performance from tech stocks weighed on the market too.
Treasury Secretary Janet Yellen, (former Fed Chair) – is reported to have said that she expects the U.S. economy to see ‘several more months of rapid inflation before it returns to a more normal level.‘ Whatever that may be?
U.S. earnings digested
As investors digested strong earnings results in the second quarter and as the U.S. heavyweight companies start to post healthy earnings amid the economic recovery, the reaction in the stock market has so far been muted.
Is inflation building in to more of a worry than the U.S. central bank would have us believe?
Covid cases on the rise again
The delta variant is gaining a hold in more countries now. The U.S. is also currently witnessing a climb in cases. If this variant gains traction, or even worse mutates again, the economic recovery will likely be slowed and stocks will lose ground.
As U.S. cases increase and as the UK opens up its economy – coronavirus cases are now higher than they were at the height of the pandemic’s second wave (or was it the third) in January 2021.
The substantial stock market gains we have witnessed on the back of vaccine roll out and of global economic recovery may soon unwind.
The pandemic isn’t over!