Stocks ended the week far from where they started it, with the major market indexes partaking in a broad selloff today.
The declines came amid a mixed batch of economic data. On one hand, the preliminary July estimate for the University of Michigan's (UofM) consumer sentiment survey fell well below economists' estimates to 80.8 from the final June reading of 85.5, with participants citing "an accelerating inflation rate" as a top concern.
On the other hand, data from the Census Bureau showed retail sales rose 0.4% month-over-month vs. estimates for a modest decline. "Increases were reasonably broad-based across categories, pointing to strong demand," says Barclays economist Pooja Sriram.
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After closing at record highs to start the week, the Dow Jones Industrial Average finished Friday down 0.9% at 34,687, while the S&P 500 Index shed 0.8% to 4,327 and the Nasdaq Composite gave back 0.8% to land at 14,427.
Other action in the stock market today:
- The small-cap Russell 2000 plunged 1.2% to 2,163.
- One name that didn't drop today: COVID-19 vaccine maker Moderna (MRNA). Its shares surged 10.3% on news it will replace Alexion Pharmaceuticals (ALXN, -0.3%) on the S&P 500, effective ahead of the market open on Wednesday, July 21.
- Charles Schwab (SCHW) rounded out a big week of bank earnings. The financial firm reported revenues of $4.5 billion in its second quarter – beating the consensus estimate – but earnings of 70 cents per share fell short. SCHW ended the session down 2.4%.
- U.S. crude oil futures closed the day up 0.2% at $71.81 per barrel, but finished the week down 3.7% – their biggest weekly decline since late March.
- Gold futures fell for the first time in four days, settling down 0.8% at $1,815 an ounce. The malleable metal posted its fourth straight weekly gain, up 0.2% from last Friday's close.
- The CBOE Volatility Index (VIX) spiked 8.5% to 18.45.
- Bitcoin shed 2.4% to $31,930.92. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
- Second-quarter earnings season starts picking up speed next week, with Netflix (NFLX), Johnson & Johnson (JNJ) and American Express (AXP) among the notable names to watch. You can check out the full earnings calendar here.
Inflation Risks Remain High
That's an outlook held not only by the majority of consumers surveyed by UofM, but also by Sal Guatieri, senior economist at BMO Capital Markets.
One such source of risk is the labor market, as staffing shortages limit production. Another is the "giddy mood among consumers." This, says Guatieri, could encourage businesses to continue raising prices in the near term. "And consumer purchasing power will get a boost from the expanded child tax credit that started this month," he adds.
So what's an investor to do?
One potential way to guard a portfolio against inflation risk is with real estate investment trusts (REITs) or healthcare stocks, both of which tend to hold up well during periods of higher prices. Another is to consider consumer staples stocks. In addition to these being defensive, dividend-paying plays, the sector also has some tailwinds on the horizon – including those direct child tax credit payments and back-to-school shopping.
Read on as we look at some of the more attractive ideas among consumer staples stocks for the remainder of the year.
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