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Market Snapshot: Dow, S&P 500 end at records, shake off earlier losses from weak China data and Afghanistan turmoil

Stocks ended at records Monday, with the S&P 500 booking its biggest daily percentage comeback since March 25, despite earlier losses tied to weaker-than-forecast Chinese economic data and the Taliban takeover of Afghanistan.

The Dow recorded its biggest daily percentage comeback since May 4 to end at a record, but the Nasdaq Composite closed lower.

How did stock benchmarks perform?

The Dow Jones Industrial Average
DJIA,
+0.31%

rose 110.02 points, or 0.3%, closing at a record 35,625.40.

The S&P 500
SPX,
+0.26%

advanced 11.71 points, or 0.3%, finishing at a record 4,479.71, after setting an intraday record of 4,480.26.

The Nasdaq Composite Index
COMP,
-0.20%

gave up 29.14 points, or 0.2%, ending at 14,793.76, after earlier trading as low as 14,610.02.

Last week, the S&P 500 tacked on 0.7% and registered its 48th record close of 2021. The Nasdaq Composite registered a 0.1% dip, its second fall in three weeks.

What drove markets?

Both the S&P 500 and the Dow have registered five straight sessions of record closing highs. Stocks closed further into record territory on Monday, despite a weekend of unrest in the Middle East and growing concerns about the spread of delta variant of COVID-19.

“There’s definitely some moving pieces today, coming in from the weekend,” said Sahak Manuelian, head of equity trading at Wedbush Securities in Los Angeles, pointing to the Taliban’s return to power in Afghanistan, more talk of tapering the Federal Reserve’s $120 billion monthly bond purchases and concerning news around the delta variant of the coronavirus.

“But you’ve got to keep things relative,” Manuelian said, of the earlier pullback in stocks on low volume trading. “Volumes also are not good, and have been pretty dismal for a while now.”

Big Tech shares rallied in afternoon trade, with Amazon.com Inc.
AMZN,
+0.15%

closing up 0.2% and Google parent Alphabet
GOOG,
+0.37%

GOOGL,
+0.42%

up 0.4%, while Facebook
FB,
+0.93%

advanced 0.9%, Netflix Inc.
NFLX,
+0.39%

gained 0.4% and Microsoft Corp.
MSFT,
+0.60%

rose 0.6%.

The dollar was modestly higher and Treasury yields were lower, as some strategists saw the dramatic fall of Afghanistan as further evidence of a less eager U.S. when it comes to policing the world and spreading its view of democracy and free markets.

Read: Will Afghanistan collapse tarnish the U.S. dollar and other assets?

“It’s a little more defensive,” said James Ragan, Director of Wealth Management Research, D.A. Davidson, about Monday’s stock action, adding that Friday’s economic data showing a slump in consumer confidence already started to lift “classic defensive” plays, including utilities, consumer stables, and healthcare.

“Couple that with rising COVID cases and hospitalization data,” and Ragan sees room for defensive sectors to move higher. “I think the market is going to focus on some of these headwinds — some geopolitical — but also how climbing case counts could impact the economy,” he said, adding that market gains over the last couple of months “might pause for a bit.”

On a daily basis, the seven-day average for new COVID-19 cases rose to 130,808 as of Sunday, according to a New York Times tracker, up 64% from two weeks ago, to mark the 11th straight day above 100,000 and the highest rate since Feb. 3. The seven-day average of deaths was 662 on Sunday, up 113% from two weeks ago and the highest since early May, while the number hospitalized has increased 65% to 76,088.

Data released out of China also showed retail sales, industrial production and fixed-asset investment all rising slower than forecast. “The slowdown is now plain for all to see. The delta outbreak and return of shutdowns across China isn’t helping either of course,” said Arne Petimezas, senior analyst at AFS.

Back in the U.S., the New York Fed’s Empire State business conditions index in August lost nearly all of its record-setting gains from the prior month. The headline general business conditions index fell to 18.3 in August, from 43, the regional Fed bank said Monday. Economists expected a reading of 30, according to Econoday. 

To be sure, any reading above zero indicates improving conditions, but the sharp decline raises some concerns about the impact of delta’s spread.

That manufacturing report follows a stunning drop in the University of Michigan’s gauge of consumer sentiment, which was described as a “stunning loss of confidence.”

Also Monday, the Taliban has swiftly taken power after the withdrawal of U.S. forces, leading some to wonder if political fallout will extend beyond foreign policy. President Joe Biden said Monday that the collapse of Afghanistan’s government shows the U.S. withdrawal “was the right decision,” and that U.S. troops will remain in the nation only to complete a safe evacuation of its citizens and allies.

Focus also was on a Wall Street Journal report, citing public statements and interviews, that said a string of strong employment reports has strengthened the case for the rate-setting Federal Open Market Committee to announce its intentions to begin tapering its monthly purchases of Treasurys and mortgage-backed securities at its next meeting, on Sept. 21-22. Some strategists think the Fed may use an annual economic symposium in Jackson Hole, Wyo., on Aug. 26-28 as an opportunity to hint at tapering timing.

“Despite splintering views within the FOMC, we look for the committee to announce plans for QE tapering as soon as the Sep. 21-22 policy meeting, with tapering commencing in early 2022, or possibly earlier in late 2021,” wrote Kathy Bostjancic, chief U.S. financial economist, in a research note.

Read: Worries about global growth outweigh report Fed moving closer to faster-than-expected tapering process

Which companies were in focus?

Pfizer Inc.
PFE,
+0.89%

 shares rose 0.9% after the company and its partner BioNTech
BNTX,
-9.07%

submitted initial data to the U.S. Food and Drug Administration in support of authorization for a third booster dose of their COVID-19 vaccine, the pair said Monday.

Shares of Tesla Inc. TSLA dropped 4.3% Monday, after reports that the U.S. government has launched an investigation into the electric vehicle maker’s Autopilot system, after reports of multiple crashes into first-responder vehicles.

Alaska Air Group IncALK said Monday it is exercising options early on 12 Boeing Co.
BA,
-2.30%

737-9 aircraft, bringing total firm commitments to 93 737-9 aircraft. Boeing shares fell 2.3%.

Oatly Group AB OTLY, shares fell 2.6% Monday, after the plant-based dairy company gave guidance ahead of expectations.

Shares of CureVac NV
CVAC,
+4.27%

 gained 4.3% Monday, bucking the selloff in the biotechnology sector and the broader stock market, after the Germany-based company revealed upbeat preclinical data regarding its vaccine candidates against the coronavirus that causes COVID-19, in nonhuman primates.

Shares of Enlivex Therapeutics Ltd. ENLV soared 13%, after trading near a five-month high, enough to pace all premarket gainers early Monday, after the Israel-based immunotherapy company said it received the OK to start a Phase 2b clinical trial for its treatment of severe and critical COVID-19 patients with acute respiratory distressed syndrome (ARDS).  

How did other assets fare?

The yield on the 10-year Treasury note TMUBMUSD10Y was 4.2 basis points lower at 1.255%. Yields and debt prices move in opposite directions.

The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.1% on the session.

Oil futures closed lower, with the U.S. benchmark CL. 1 down 1.7% to settle at $67.29 a barrel on the New York Mercantile Exchange. Gold futures GC00 closed 0.7% higher, settling at $1,789.80 an ounce.

In European equities, the Stoxx Europe 600 SXXP closed 0.5% lower, while London’s FTSE 100 UKX fell 0.9%.

In Asia, the Shanghai Composite SHCOMP finished positive but nearly unchanged, Japan’s Nikkei 225 NIK tumbled 1.6%, while Hong Kong’s Hang Seng Index HSI shed 0.8%.

Steve Goldstein contributed reporting

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