US stock markets once again had a mixed performance on Friday, with the Dow Jones Industrial Average dipping. However, the S&P 500 and Nasdaq hovered near their latest record highs. The S&P 500 fell 0.13%, while the Dow Jones lost 0.54%. The tech-heavy Nasdaq Composite saw a slight 0.05% decline as it shed some of its early gains.
Stocks had previously gained momentum earlier in the week, driven by better-than-expected economic data and strong corporate earnings. Investors are still digesting the effects of President Trump’s tariffs, with consumer sentiment improving despite fears over inflation. Earnings reports have continued to flood in, with mixed results from companies like Netflix (NFLX) and American Express (AXP).
Market Movers:
- Netflix (NFLX): -5.02%: Netflix's second-quarter earnings beat expectations, however the stock dropped significantly due to unmet high expectations. Despite a solid profit beat and a revenue increase, analysts suggest that Netflix's lofty valuation left little room for error.
- American Express (AXP): -2.68%: American Express posted strong second-quarter results, showing resilience among high-end consumers. Despite the positive earnings, the stock fell as the market likely priced in expectations of robust consumer spending, with a slight pullback noted in some sectors like airlines and lodging.
- Circle Internet Group (CRCL): +1.33%: Circle stock rose after the passage of the Genius Act, a landmark piece of legislation that brings regulatory clarity to the stablecoin market. The bill is seen as a major step forward for Circle and other companies in the cryptocurrency space.
- Oil Prices: Oil prices showed some fluctuation on Friday, driven by Middle Eastern tensions and new sanctions on Russia. West Texas Intermediate (WTI) crude rose 2% before paring some gains to hover around $67 per barrel, while Brent crude briefly traded above $69 per barrel.
Economic Data: Strong Retail Sales and Lower Inflation Expectations
Retail sales rebounded strongly in June, rising by 0.6%, beating economists’ expectations of a 0.1% increase. This marks a recovery from May’s slump of -0.9%. Retail growth has largely continued despite tariff concerns, as consumers show resilience in the face of potential price hikes. Nationwide senior economist Ben Ayers highlighted the ongoing strength in consumer spending, though some caution persists due to ongoing tariff uncertainty.
Additionally, the University of Michigan consumer sentiment survey for July revealed a significant decrease in one-year inflation expectations, from 5% in June to 4.4% in July. This suggests that consumer concerns over price hikes may be easing, providing further optimism for the broader economy. However, the survey's overall sentiment index showed only a slight improvement, indicating that more positive sentiment may be needed for a full economic rebound.
Earnings Reports
While some companies have posted strong earnings, such as American Express, others like Netflix have experienced setbacks. Netflix's failure to meet raised market expectations after a solid quarter left its stock falling by over 5%. This demonstrates how high expectations for tech stocks can weigh heavily on share prices, even when results are strong.
Meanwhile, strong results from American Express reflected consumer resilience, particularly among higher-income households. Despite some softening in certain sectors, such as lodging and airlines, AmEx’s solid transaction growth provides further evidence of a healthy consumer sector.
Looking Ahead
As earnings season continues, markets will likely remain volatile with high expectations for Big Tech earnings. Investors will focus on Netflix's guidance and whether other tech giants like Google, Microsoft, and Meta can meet expectations. Meanwhile, inflation and economic indicators will remain at the forefront, influencing Federal Reserve policies and interest rate decisions. Traders are now pricing in a reduced chance of rate cuts in September, as inflation fears persist alongside economic resilience.
With continued earnings reports due in the coming days, and geopolitical risks from oil-producing regions, markets may experience further fluctuations as investors balance growth with uncertainty.
