The S&P 500 index slipped 0.9% last week amid higher-than-expected June inflation figures and a disappointing initial round of Q2 earnings reports, although better-than-expected June retail sales data helped minimize stocks’ overall decline. The index is still in positive territory for July with a month-to-date gain of 2.1%, but it is down 19% for the year to date.
The US seasonally adjusted consumer price index, a measure of inflation, rose by 1.3% in June, ahead of expectations for a 1.1% increase and following a gain of 1% in May, according to data released Wednesday by the Bureau of Labor Statistics. The year-over-year rate for overall CPI accelerated to a record 9.1% from 8.6% in May, while the rate for core CPI slowed modestly to 5.9% from 6%.
The US producer price index jumped 11.3% in June from a year earlier following May’s revised growth of 10.9%, the Bureau of Labor Statistics reported Thursday. The consensus on Econoday was for a 10.4% gain.
Meanwhile, among the first Q2 earnings reports, JPMorgan Chase (JPM) posted a decline in second-quarter earnings that missed analysts’ estimates as the lender set aside more cash to cover for potential loan losses and suspended its share repurchase program. Morgan Stanley (MS) also reported lower second-quarter earnings as the company said its investment banking segment was hurt by “the uncertain macroeconomic environment.”
However, the week’s decline was pared on Friday as stocks rose after June retail sales data showed US retail sales increased slightly more than expected in June. The retail sales increase for last month was 1%, a bit better than the Econoday consensus estimate for a 0.9% increase. Excluding autos and gas, retail sales rose 0.7%, compared with a 0.2% fall expected by Wall Street.
All but one sector of the S&P 500 fell last week. Communication services had the largest weekly percentage drop, falling 3.3%, followed by a 3.1% slide in energy. Among the others in the red, the materials, industrials and consumer discretionary sectors all logged declines of more than 1% each. The lone gainer was consumer staples, which edged up 0.1%.
This week, the Q2 earnings reporting season will kick into a higher gear, with results expected from a long list of companies including Bank of America (BAC), Goldman Sachs Group (GS), Hasbro (HAS), Halliburton (HAL), Johnson & Johnson (JNJ), Netflix (NFLX), CSX Corp. (CSX), United Airlines Holdings (UAL), AT&T (T), Verizon Communications (VZ), Twitter (TWTR) and American Express (AXP).
Economic reports due this week will feature housing data in the earlier part of the week, including the NAHB/Wells Fargo Housing Market Index for July on Monday, June building permits and housing starts on Tuesday, and June existing home sales on Wednesday. Weekly jobless claims and the July Philadelphia Fed manufacturing index are expected Thursday, followed by S&P Global’s July purchasing managers’ indexes for the US manufacturing and services sectors on Friday.
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