Dow slips as stock market beset by end-of-week turbulence

U.S. stock indexes were lower for a fifth straight day Friday afternoon, after opening higher, as investors worried that the high number of coronavirus delta variant cases may be slowing economic recovery, despite new vaccination mandates announced by President Joe Biden on Thursday night.

How are stock indexes trading?

On Thursday, the Dow industrials fell 151.69 points, or 0.4%, to end at 34,879.38, the S&P 500 index closed down 20.79 points, or 0.5%, to 4,493.28, and the Nasdaq Composite Index finished at 15,248.25, a loss of 38.38 points, or 0.3%.

For the week, the Dow is on pace for a 1.6% decline, while the S&P 500 is track for 1.1% loss and the Nasdaq was heading for a weekly slide of 0.9%, according to FactSet data, at last check.

What’s driving the market?

Apple Inc.

led the Dow lower when a federal judge in the Epic Games Inc. case issued an injunction that said the company can no longer force developers to use its payment system, effectively bypassing commission fees of 15% to 30%. However, the iPhone maker was not ruled an antitrust monopolist.

“The bullishness is fading quickly,” said Steve Sosnick, chief strategist at Interactive Brokers, in a phone interview Friday. “It’s a seasonally awkward time for the market.”

The week’s trading action comes amid concerns about the impact of the coronavirus delta variant on global economic growth in recent months.

Biden on Thursday announced new vaccine mandates, including a requirement that executive-branch employees as well as federal contractors vaccinate, with no test alternative. He is also discussing a Labor Department rule requiring businesses with 100 or more workers to ensure their employees are vaccinated or show a negative test result weekly or more frequently.

The U.S. is averaging just under 150,000 new cases a day, with only 53% of the population fully vaccinated, which is well behind many countries in Europe and Canada, according to a New York Times tracker.

While the focus is on rising COVID cases, markets are also watching the Federal Reserve for an indication of when it might taper its bond-buying purchases. Investors will have to wait until Sept. 21-22 for the next Federal Open Market Committee meeting. However, there is already speculation that the Fed will set the stage at its next meeting for an announcement of a plan to taper its monthly asset purchases at its November gathering, according to The Wall Street Journal.

With the stock market near record highs, some investors are growing concerned about the end of “some of the massive stimuli” that have pushed the market higher, including fiscal and monetary stimulus programs introduced during the pandemic, according to Sosnick. He said that he’s seen “very solid bids for puts protection” in the options market, which is a form of  “insurance” for investors seeking to protect their portfolios from a possible decline in stocks.

Read: Fed’s Kaplan, Rosengren to sell stocks to avoid perception of conflict of interest

Meanwhile, a report on wholesale inflation came in hotter than expected. The U.S. producer-price index rose 0.7% in August, the Labor Department said Friday, down from a 1% jump in July but up from average forecast of economists polled by WSJ for a 0.6% rise.

“We are still seeing inflationary pressures,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in an interview Friday. She said the PPI data is more evidence in favor of a strategy that buys stocks of companies that can pass higher costs to their customers.

“The extent that we see flow through to the consumer remains to be seen, but this is another shot to the transitory narrative that has been the dominant reason to continue emergency fed policy,” wrote Sean Bandazian, investment analyst for Cornerstone Wealth, in emailed remarks on Friday.

A number of Fed officials have described inflation as short-lived and economists are starting to talk about prices peaking in the wholesale sector. However, producers are still struggling with shortages, bottlenecks and transportation woes.

“These releases frequently indicate that higher prices will remain sticky for a while,” the Cornerstone analyst said.

Joe LaVorgna, chief economist of the Americas at Natixis, also noted that inflation has the potential to be a much longer-term concern that has negative implications for financial markets.

“With the economy already having recouped the entire amount of its pandemic-related losses and the labor market experiencing record demand for workers, the potential for a permanent regime shift in inflation is high,” the economist wrote in a Friday research note along with colleague Troy Ludtka.

Goodwin told MarketWatch that she remains “fairly constructive” on markets as the economic recovery moves “mid-cycle” with the delta variant “slowing but not derailing” growth. But she said “our conversations with clients and investors point to high and really growing anxiety” over the paths ahead for the economy and markets.

Which companies are in focus?
  • Shares of Echo Global Logistics Inc. ECHO rocketed 53% higher Friday, after the transportation and supply chain company announced an agreement to be acquired by private-equity firm The Jordan Company LP in a deal valued at $1.3 billion. 

  • Kroger CoKR reported second-quarter net income totaling $467 million, or 61 cents per share, down from $819 million, or $1.03 per share last year. Its stock was down 7.5%.

  • Wells Fargo Corp. shares

    rose 0.4% on Friday despite a $250 million civil penalty from the Office of the Comptroller of the Currency for not meeting requirements of its 2018 action against the bank.

  • Shares of Bumble Inc. BMBL rose almost 8% after the dating app said the size of the previously announced stock offering increased by 20%, and announced the pricing of the offering at $54.00 a share.

  • Vista Outdoor IncVSTO announced Friday an agreement to buy San Diego-based golf performance analysis and game enhancement company Foresight Sports for $474 million. Its stock was trading about 4% higher.

  • Children’s clothing brand OshKosh B’Gosh has joined with lifestyle brand Kith for a 28-piece capsule collection that will be available on Friday at all Kith stores, the Kidset website and Kith’s European e-commerce site. OshKosh B’Gosh, a 126 year-old brand, is part of the Carter’s Inc. CRI portfolio. Its stock was up 1.4%.

  • Shares of Apple Inc.

    fell 2.8%, after a federal judge in the Epic Games Inc. case ordered an injunction that would allow developers to provide in-app purchases on the App Store, effectively bypassing commission fees of 15% to 30%. However, it was not ruled an antitrust monopolist.

How are other assets trading?
  • The 10-year Treasury note 

     rose about 3 basis points to around 1.335%. Yields and debt prices move in opposite directions.

  • The dollar was trading 0.1% higher, as measured by the ICE U.S. Dollar Index 
     which stood at around 92.6, putting the gauge on track for a 0.6% weekly rise.

  • Gold futures fell, with the December contract 

    settling 0.4% lower at $1,792.10 an ounce for a weekly loss of 2.3%.

  • Oil futures 

    rose, with West Texas Intermediate crude settling 2.3% higher at $69.72 a barrel for a weekly climb of 0.6%.

  • The Hang Seng 

    closed 1.9% higher and notched a weekly gain of 1.2%. Elsewhere in Asia, the Shanghai Composite 

    ended up 0.3% and notched a weekly advance of 3.4%, while Japan’s Nikkei 225 NIK advanced 1.3% on Friday, contributing to a weekly gain of 4.3%, putting the index on track for its best monthly gain, 8.2%, since November of 2020 when it surged 15%.

  • European equities were mixed, with the Stoxx Europe 600 

    closing 0.3% lower and the commodity-heavy FTSE 100 

    gaining less than 0.1%. For the week, the Stoxx was down 1.2%, while the FTSE 100 booked a 1.5% weekly slide.

—Barbara Kollmeyer contributed to this report

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