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The market succumbed to COVID Delta variant fears last Monday, then snapped back to a record close by week’s end. All major averages closed higher for the week with the S&P 500 Index +2.0%, the NASDAQ +2.9% and the Dow +1.1%. The U.S. 10-year Treasury bond yield decreased to 1.28% at Friday’s close versus 1.30% the previous week.
The second quarter earnings reporting season continues this week with the large capitalization technology companies carrying the baton. Apple, Microsoft, Amazon, Alphabet, and Tesla all report this week. Collectively, these companies represent over 20% of the S&P 500’s market cap. In all, 177 companies in the S&P 500 Index are scheduled to report earnings this week. The current expectation is for S&P 500 earnings growth of 78.1% year over year, an increase from the expectation of 72.0% year over year growth from last week.
Initial unemployment claims for the week of July 17th increased to 419,000 versus the previous week at 368,000. Continuing claims for July 10th were 3.236 million versus 3.265 million the week prior. We expect some choppiness in the labor market over the next few months as individuals contend with expiring unemployment benefits and decisions about returning to the workplace.
In our Dissecting Headlines section, we take a look at current back-to-school shopping forecasts.
Financial Market Update
Dissecting Headlines: Back-to-School Shopping
Inconsistent education schedules shifted traditional back-to-school shopping in 2020 to accommodate online education. This year, the expectation that school gets back to normal (barring Delta variant disruptions) means a more consistent pattern of back-to-school shopping.
According to the National Retail Federation, families with children in elementary through high school plan to spend $848.90 per family, $59 more than last year, on average for back-to-school items. Total back-to-school spending is expected to reach $37.1 billion, a 9.4% increase from 2020 and an all-time high in the survey’s history. Major categories for spending include electronics, clothing, and shoes. While online shopping continues to be a prime destination, the survey indicated shoppers are more comfortable in stores this year. Forty-three percent of survey respondents said they plan to use money received from government stimulus for back-to-school purchases.
College students and their families are also setting records in spending. Total spending on back-to-college is expected to reach $71.0 billion, a 4.9% increase from 2020. Major spending categories for college students include electronics, dorm and apartment furnishings, and clothing.
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