Markets Brief: As Stocks Hold Recent Gains, CPI Report Ahead Could Set the Tone for the Fed
Oil stocks fall as crude oil prices decline. Uber and Lyft rally on solid earnings results.
As stocks head into the middle of August, the market continues to hold ground gained since hitting bear-market lows in June. The Morningstar US Market Index finished the most recent week up 0.6% from the prior week, and has advanced 13.6% from its June 16 trough.
Jobs data came in much higher than expected, with nonfarm payrolls increasing by 528,000 in July, more than double estimates of 250,000. Unemployment declined to 3.5%, bringing it down to prepandemic levels.
Driving the biggest gains in the market were stocks from the technology and communication services sector. The energy and real estate sectors were down the most last week.
Solid earnings results from technology companies lifted their shares higher, including ride-hailing firms Uber (UBER) and Lyft (LYFT). Meanwhile, declining oil and gas prices triggered a selloff for many firms in the oil and gas industry.
Investors will also be on close watch for upcoming inflation figures when the Consumer Price Index report for July is released on Aug. 10. Morningstar U.S. chief economist Preston Caldwell says the CPI report will be key to setting the direction for interest-rate policy in the wake of the strong July jobs report.
Economists are expecting the report to show inflation has peaked, which as of June, hit 9.1% year over year, a 41-year high. Estimates show inflation to have risen 0.2% in July, meaning an 8.7% inflation rate for the last 12 months ending in July, which would be a 40-year high.
Ride-hailing companies Uber and Lyft both rallied following positive earning news. Alnylam Pharmaceuticals shares rose following positive results in a study for its heart disease drug.
Technology and communication services companies led all sectors. Narrow-moat Cloudflare, which surged 46.4% for the week, and Atlassian (TEAM) both beat earnings.
Coinbase shares also popped following the announcement of a partnership with BlackRock to increase accessibility to bitcoin for institutional clients, The Wall Street Journal reported.
The worst-performing companies in the past week were Ball (BALL), I-MAB (IMAB), APA (APA), Syneos Health (SYNH), and Core Laboratories (CLB). Lower-than-expected earnings sent investors out of several stocks.
Packaging and containers company Ball beat sales expectations, but earnings were disappointing as demand slowed. Core Laboratories stock continued its decline after missing both lower revenue and earnings than expected.
Oil and gas stocks fell after crude prices declined 10.2% for the week, closing below $90 per barrel for the first time since Feb. 10. Among the worst performers were Patterson-UTI (PTEN), and Helmerich & Payne (HP).
Jakir Hossain does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.