U.S. stocks under pressure as month ends, with Amazon disappointment fueling tech selling


U.S. stocks on Friday headed modestly lower on the last day of trading for the month, with technology stocks set to register the sharpest declines after disappointing results from Amazon.com.

On Thursday, the Dow rose 153.60 points, or 0.4%, to close at 35,084.53, The S&P 500 finished at 4,419.15, up 18.51 points, or 0.4% and the Nasdaq Composite advanced 15.68 points, or 0.1%, to end at 14,778.26.

Stocks finished higher on Thursday after data that showed gross domestic product growing at an annualized pace of 6.5% in the second quarter. Investors also shook off a lukewarm debut for shares of commission-free trading app Robinhood Markets HOOD, .

What’s driving the market?

A pullback for stock markets was taking shape to end the month’s action on Wall Street, after selling in Asia capped a withering week in Asia. Hong Kong’s Hang Seng HSI, -1.35% marked its worst weekly decline since February and its worst monthly decline since October of 2018.

Technology stocks were leading U.S. stocks lower on Friday, with Amazon.com AMZN, -7.10% shares down 6% in premarket trading after second-quarter results showed a miss on sales and the forecast for the third quarter, suggesting a slowdown in e-commerce activity is set to continue.

“Revenues were still in excess of $110bn at $113bn, while sales for Q3 were expected to be equally as good. They just weren’t good enough,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.

A heavy week of corporate earnings reports comes as data showed that inflation in the U.S. rose sharply again in June, as gauged by the so-called PCE price index, the Federal Reserve’s preferred measure of pricing pressures, which rose a sharp 0.5% for the month and 4% for the year.

The increase over the past year remained at a 13-year high, raising the cost of living for consumers and casting a shadow over a strong economic recovery from COVID-19. The surge in prices is largely tied to the reopening of businesses and widespread shortages of supplies and labor spawned by the pandemic.

Meanwhile, consumer spending rose a sturdy 1% in June, the government said Friday. On Thursday, the government said consumer outlays surged almost 12% in June on an annualized basis, underpinning a strong economic recovery.

Meanwhile, St Louis Federal Reserve President James Bulllard said that he thinks financial markets “are very much ready for a taper,” noting that he would prefer to begin the process of scaling back on Fed’s $120 billion a month in Treasurys and mortgage-backed securities this fall and finish by the end of the first quarter of 2022. His comments come after the Fed on Wednesday held interest rates steady at a range between 0% and 0.25% and emphasized the central bank’s view that rising prices are almost entirely the result of the reopening of the U.S. economy.

Friday’s economic reports follow a reading on Thursday that showed that U.S. gross domestic product grew at an annualized pace of 6.5% in the second quarter, falling short of the average forecast of 9.1% produced by a survey of economists by The Wall Street Journal. Separately, data from the Labor Department showed first-time applications for unemployment benefits fell 24,000 last week to 400,000.

Separately on Friday, the Chicago Business Barometer, also known as the Chicago purchasing managers index, came in at 73.4 in July, versus expectations for 64.2 and 66.1 last month.

On the public health front, COVID-19 concerns continue apace after an internal document from the Centers for Disease Control and Prevention, pointed to increasing worries by officials over the fast-spreading delta variant. First reported by The Washington Post, the data said the variant may be as easily spread from vaccinated and unvaccinated individuals and was as “transmissible as chickenpox.”

Friday’s data also will include a consumer-sentiment report from the University of Michigan on the economy and inflation at 10 a.m. ET

Which companies are in focus
  • Amazon AMZN late Thursday reported second-quarter earnings of $7.78 billion, or $15.12 a share, up from $10.30 a share a year ago, when shelter-in-place requirements from the COVID-19 pandemic began and led to big uptakes in e-commerce. Sales grew to $113.1 billion from $88.9 billion a year ago, missing expectations as sales that had been growing more than 40% in recent quarters fell to growth of 27%.
  • Shares of Exxon Mobil Corp.  XOM, -2.04% tacked on 0.9% in premarket trading Friday, after the oil giant swung to the highest second-quarter profit since the end of 2019 as revenue more than doubled to well above forecasts.
  • Shares of Chevron CorpCVX climbed Friday, after the oil giant swung to a second-quarter profit and reported revenue that beat expectations, with free cash flow reaching the highest in two years.
  • Shares of Procter & Gamble Co.  PG, +2.97% rallied 1.0% in premarket trading Friday, after the consumer products giant reported fiscal fourth-quarter profit and sales that rose above expectations, with the strongest growth in its healthcare and beauty businesses. 
  • Shares of Caterpillar Inc. CAT, -3.74% edged up 0.2% in premarket trading, as the construction and mining equipment company reported a second-quarter net profit that tripled and revenue that topped forecasts, even as the largest construction business came up short.
What are other markets doing?
  • Treasury yields slipped, with the yield on the 10-year Treasury note TMUBMUSD10Y, 1.235% at 1.24%. down more than 2 basis points on the day.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was little-changed at 91.882.
  • Oil futures were trading slightly lower, with the U.S. benchmark CL.1, +0.15% off 9 cents, or 0.1%, at $73.54 a barrel, headed for a weekly gain and a marginal monthly rise; while December gold futures GC00 GCZ21 was trading 0.3% lower at around $1,830.40 an ounce, but was headed for weekly and monthly gains.
  • In European equities, the Stoxx 600 Europe index XX:SXXP was trading 0.4% lower, while London’s FTSE 100 UK:UKX was down 0.7%. In Asia, Hong Kong’s Hang Seng closed 1.4% lower and booked a nearly 5% loss for the week. The index ended down nearly 10% in July. The Shanghai Composite CN:SHCOMP finished down 0.4% and logged 4.3% weekly slump and fell 5.4% for the month. Meanwhile, Japan’s Nikkei 225 JP:NIK declined 1.8% overnight in Asia, falling 1% for the week and 5.2% for the month. The China CSI 300 000300, -0.81% closed down 0.8% for the day, 5.5% for the week and booked a nearly 8% monthly decline.