Stocks on Friday appeared to extend their losing streak to a fifth day, with investors growing more cautious about the COVID-19 pandemic’s impact on the economy.
President Joe Biden spoke with Chinese President Xi Jinping for the first time in months, provided modest comfort to investors early in the session. While little progress was made, the call highlighted how the world’s two largest economies — which have a raft of differences on critical policy issues between them to work out — are still keeping the lines of communication open.
However, after Bloomberg reported that the Biden administration may investigate Chinese subsidies — and their impact on the U.S. economy — stocks reversed early gains.
“The Sino-American relationship is in disrepair, and today’s call does not seem to change this,” noted Marc Chandler, chief market strategist at Bannockburn Global Forex, in a morning note he entitled “frenemies talk, but progress elusive.”
He added: “The US appears to list actions it wants China to take, while China’s demands seem minimalist: Quit demonizing it and respect its red lines. Yet its red lines strike at the very heart of the international order, such as its claims on most of the South China Sea and its aggressive provocative actions in the region,” Chandler added.
Meanwhile, data on Friday showed that prices paid by producers surged last month, as supply and labor strains exerted more inflationary pressure on the economy — showing how demand remains white hot and resilient, even in the face of COVID-19. The producer price index jumped by 0.7% last month, and skyrocketed by 8.3% through August, the biggest year-on-year advance since November 2010, after surging 7.8% in July.
“At first blush it could raise some eyebrows that the market would shrug off the biggest producer price increase ever recorded, yet context is key,” said Mike Loewengart, managing director of investment strategy at E*TRADE Financial.
“Anyone who has bought pretty much anything recently knows that supply chain issues are widespread and inflation is real, so this likely won’t be too much of a surprise for the market,” he added. “Keep in mind we’re still in the transitory period where the Fed is not inclined to budge on easy money policies.”
On Friday, “Fortnite” developer Epic Game’s antitrust lawsuit against Apple (AAPL) upended the mobile device maker’s tightly protected ecosystem over its booming App Store. The tech giant’s stock tumbled by nearly 3% intraday after a decision issued by a federal California judge largely sided with Epic, issuing a permanent injunction against Apple’s App Store policies. The move opens the door for developers to offer customers third-party payment options in apps.
During Thursday’s regular session, major benchmarks logged a 4th consecutive day of losses. Traders have been struggling to reconcile a seemingly hot jobs market with soaring coronavirus infections that have blunted the recovery’s momentum. However, the slowing momentum also gives the Federal Reserve room to keep its foot on the monetary policy pedal, which has given stocks a boost.
Yet playing in the background is the COVID-19 pandemic, where deaths and hospitalizations are soaring because of the more contagious Delta variant. President Joe Biden announced on Thursday a sweeping set of mandates designed to nudge hesitant citizens into getting vaccinated.
Investors have been in a foul mood since August’s jobs data fell far short of market expectations last week, tempering hopes for the fourth quarter and getting September off to a rough start.
“You look at the markets and they’ve been amazingly calm and we think September is right for a pullback,” G Squared Wealth CFA CIO Victoria Greene told Yahoo Finance Live on Thursday. “We’re kind of in a purgatory.”
However, at least 2 pieces of jobs data this week have painted a different picture than August’s nonfarm payrolls. Labor Department data showed that open jobs hit yet another series record, with workers quitting their jobs en masse, and nearly 11 million positions unfilled. And on Thursday, new jobless claims set a new pandemic era low at 310,000, temporarily allaying fears about the economy.
On Thursday, Biden ordered that all businesses with over 100 employees require workers to get inoculated or be tested weekly, and declared his intent to require all federal employees to get their shot. And a growing number of private employers are already imposing vaccine mandates, even as many push back return-to-office plans as the Delta variant rears its head.
“We’ve been patient, but our patience is wearing thin,” a clearly frustrated Biden declared, addressing the number of vaccine-resistant holdouts — many of whom have flooded hospitals around the country. “And your refusal has cost all of us.”
Wall Street economists have explicitly linked mass vaccinations to growth, and the president’s move could also bolster expectations for the economy, and market sentiment.
11:10 a.m. ET: Cathie Wood’s ETFs cash out of some TSLA stock
Via Bloomberg, Cathie Wood’s exchange-traded funds have sold some of their Tesla shares in the past two days, taking advantage of the recent rally as the stock rallies into a third week. Wood is still an unrepentant Tesla bull, having told Yahoo Finance just last week that her base case is a $3000 handle on the stock.
10:15 a.m. ET: Easy come, easy go
Major indices have are falling out of bed after an early rally slowly fizzles, suggesting that Wall Street is heading toward its fifth day of losses. There’s no major news trigger but the COVID-19 pandemic is clearly still weighing on market sentiment. The Dow is off by 44 points, but both the S&P and Nasdaq are clinging to gains.
9:30 a.m. ET: Stocks pop at the open
Here were the main moves in markets as of 9:32 a.m. ET:
S&P 500 (^GSPC): 4,519.65, +26.37 (+0.59%)
Dow (^DJI): 35,096.00, +216.62 (+0.62%)
Nasdaq (^IXIC): 15,345.02, +96.76 (+0.63%)
Crude (CL=F): $69.81 per barrel, +$1.67 (+2.45%)
Gold (GC=F): $1,796.40 per ounce, -$3.60(-0.20%)
10-year Treasury (^TNX): +2.5 bps to yield 1.323%
8:30 a.m. ET: PPI skyrockets in August
U.S. producer prices soared in August, indicating that high inflation is likely to persist for a while, with supply chains remaining tight as the COVID-19 pandemic drags on.
The producer price index for final demand rose 0.7% last month, the Labor Department said on Friday. That followed two straight monthly increases of 1.0%. In the 12 months through August, the PPI accelerated 8.3%, the biggest year-on-year advance since November 2010, after surging 7.8% in July.
7:50 a.m. ET Friday: Futures rise, look to end week on a high note
Here’s where markets were trading before the bell:
S&P 500 futures (ES=F): 4,511.50, +19.25 (+0.43%)
Dow futures (YM=F): 35,046.00, +176.00 (+0.50%)
Nasdaq futures (NQ=F): 15,625.25, +66.50(+0.43%)
6:25 p.m. ET Thursday evening: Stock futures mixed
Here’s where markets were trading in the after-hours session:
S&P 500 futures (ES=F): 4882.75, -0.25
Dow futures (YM=F): 34,877, +7.00
Nasdaq futures (NQ=F): 15,566, +6.00
By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek