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U.S. equities were unable to break free from the bears’ grip, with tech continuing to underperform the rest of the market. The release of higher-than-expected producer inflation numbers in July, which climbed from 0.2% to 0.8% year-on-year, above estimates of 0.7%, dominated headlines Friday.
The surprise in the PPI reading has awakened marginal upticks in market expectations for Fed rate hikes, even though traders remain largely convinced (with an 89% probability) that the Fed will opt to leave rates on hold in September. Te 2-year yield moved up 5 basis points to 4.9%, impacting rate-sensitive assets.
Cues From Friday's Trading:
The S&P 500 Index was down 0.2% on Friday, on track to close its second straight week of losses.
The Nasdaq 100 Index fell 0.9%, underperforming other major U.S. averages, on pace for its second consecutive week in the red for the first time this year.
Blue-chip stocks in the Dow Jones held up nicely, gaining 0.2% on the day and on track for a slightly positive weekly close.
Small caps in the Russell 2000 edged 0.2% higher, but were still 1.6% lower for the week.
US Index Performance On Friday
| Index | Performance (+/-) | Value |
| Nasdaq 100 | -0.86% | 15,018.15 |
| S&P 500 Index | -0.17% | 4,463.55 |
| Dow Industrials | +0.22% | 35,252.43 |
| Russell 2000 | +0.19% | 1,926.28 |
Analyst Color:
The lackluster market movement seen so far in August should not unduly worry investors, going by the comments of Fund Strat's Tom Lee. The analyst said despite the tame inflation data, stocks moved in a lackluster manner on Thursday due to the rising bond yields.
“Hard for equities to be happy with rising yields,” he said, adding that yields have been rising for most of 2023.
“This does mean second half of 2023 or even rest of August a write off,” Lee said. He noted that equities have seen better returns and rise 78% of the time when the market gained more than 15% in July and was down the first three sessions of August.
The market rises only 33% of the time when the first three days of August are positive, he added.
Friday’s Trading In Major US Equity ETFs: In midday trading on Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) was 0.2% lower to $445, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose 0.2% to $352 and the Invesco QQQ Trust (NASDAQ:QQQ) was 0.8% lower to $365, according to Benzinga Pro data.
The Energy Select Sector SPDR Fund (NYSE:XLE) outperformed, rising 1.6%.
The Technology Select Sector SPDR Fund (NYSE:XLK) and Communication Services Select Sector SPDR Fund (NYSE:XLC) were the weakest links, down 0.8% and 0.5%, respectively.
Latest Economic Data:
Producer inflation rose 0.8% year-on-year in July, up from 0.2% in June and topping forecasts of 0.7%. On a monthly basis, the PPI’s pace of increase also quickened, growing by 0.3% in July, a notable increase from the revised flat reading seen in the previous month.
The core PPI index, which excludes the more volatile components of food and energy, maintained a year-on-year increase of 2.4% for July, matching the previous month’s figure but exceeding market expectations, which were at 2.3%.
The Michigan Consumer Sentiment Index edged down from 71.6 in July to 71.2 in August, slightly above the projected 71, as per preliminary estimates. This figure still stands 22% higher than a year ago.
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Stocks In Focus:
Nvidia Corp. (NASDAQ:NVDA) fell 3.4% for the day and nearly 9% for the week, on track for the worst weekly performance in nearly a year.
Occidental Petroleum Corp. (NYSE:OXY) rose 3.6%, marking the best performance among S&P 500 stocks on Friday amid higher oil prices. The International Energy Agency (IEA) said that global oil demand will hit new highs in August and is expected to reach 102.2 million barrels per day (mb/d) this year.
Apellis Pharmaceuticals Inc. (NYSE:APLS) rose 17% after rising 12% Thursday.
Penny stock Amyris, Inc. (NASDAQ:AMRS) soared 133%, driven by retail traders flows after the company filed for bankruptcy on Wednesday. WeWork Inc. (NYSE:WE) rose 10% after a 43% rally Thursday.
Commodities, Bonds, Other Global Equity Markets:
Crude oil rose 1%, with a barrel of WTI-grade crude trading at $83. The United States Oil Fund ETF (NYSE:USO) was 0.8% higher to $75.
Treasury yields were higher, with the 10-year yield up 5 basis points to 4.16% and the two-year yield up by 6 basis points to 4.9%. The iShares 20+ Year Treasury Bond ETF (NYSE:TLT) was 0.2% lower for the day.
The dollar rose, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), up 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust (NYSE:FXE), was 0.3% lower to 1.0950.
European equity indexes closed in the red. The SPDR DJ Euro STOXX 50 Etf (NYSE:FEZ) fell 1.3%.
Gold edged 0.1% up to $1,914/oz. The SPDR Gold Trust (NYSE:GLD) was flat at $178. Silver eased 0.1% to $22.7, with the iShares Silver Trust (NYSE:SLV) down also 0.1% to $20.8. Bitcoin (CRYPTO: BTC) was 0.4% lower to $29,313.
Staff writer Piero Cingari updated this report midday Friday.
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