S&P 500 Falls as Bulls Sidelined Despite Upbeat Earnings; Retail Sales Eyed

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Investing.com – The S&P 500 fell Thursday, as upbeat quarterly results from corporates weren’t enough to shake the broader market out of its malaise ahead of data due Friday expected to show a rebound in retail sales .

The S&P 500 fell 0.33%, the Dow Jones Industrial Average gained 0.15%, or 54 points, the Nasdaq was down 0.70%.

Banks continued to report quarterly results that topped Wall Street expectations, helping financials snap out of their recent malaise even as U.S. bond yields continued to make losses.  The 10-year yield hit its lowest since mid-February.

Morgan Stanley (NYSE:MS) ended modestly higher after reporting second-quarter results that beat expectations on the both the top and bottom lines as strength in equities trading and investment banking fees bolstered performance.

The regional banks, however, fared better with U.S. Bancorp (NYSE:USB) and Truist Financial (NYSE:TFC) topping Wall Street estimates, sending both shares more than 2% higher.

But the backdrop of positive quarterly results did little to spark a bid in the broader market as energy and tech stocks led the downside.

Energy stocks declined more than 1% paced by a fall in oil prices on expectations for further supply after Saudi Arabia and the United Arab Emirates reportedly reached a compromise that should lead to an easing of production curbs.

The major cap tech stocks struggled to keep up their recent momentum.

Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT were in the red.

On the economic front, the recovery in the labor market continues to gather pace as jobless claims fell to a pandemic low.

Initial jobless claims fell 26,000 to 360,000 from an upwardly-revised 386,000 in the week ending July 10.

“There was a noticeable reversal of progress in the claims data in mid-June, but the data of the last three weeks suggests that the recovery is back on track,” Jefferies (NYSE:JEF) said in a note.

The malaise in the broader market comes just a day before the release of the retail sales data that will serve as a gauge for the health of the consumer. Retail sales are expected to have declined 0.4% in June following a 1.3% decline in May.

The consumer, which makes up two thirds of the economic growth, is expected to keep the economy humming along, and take up the supportive void expected to be left by the Fed when the central bank eventually begins to tighten monetary policy.

“In a K-shape recovery […] you need to consumers to come in and be healthy and provide support, because there has to be a handoff from, from a Fed-supported economy to a consumer-supported economy,” Darren Schuringa, CEO of ASYMmetric ETF told Investing.com earlier this week.

Looking ahead, some are forecasting a big move in equities ahead including a possible correction. 

“Based on technical setups and the current macro environment, we could see some explosive moves in U.S. equities in the coming weeks, in our opinion. This could include a bigger correction on the S&P 500 than experienced thus far this year- where we continue to watch for the possibility of a 10% decline (potentially more) in the second half of the year,” according to Mark Luschini, Chief Investment Strategy of Janney Montgomery Scott.

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