* U.S. stock indexes higher, on track for weekly gains
* Energy down most among S&P sectors; comms svcs up most
* STOXX up 1.0%
* Dollar up slightly; gold, crude down; bitcoin inches up
* U.S. 10-yr Treasury yield ~1.28%
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PARADIGM SHIFT: SERVICES SECTOR LOSES STEAM, MANUFACTURING
GAINS MOMENTUM (1035 EDT/1435 GMT)
Pandemic-related shutdowns forced consumer demand toward
goods and away from customer-facing services. And as the
reopening progresses, most observers assumed pent-up consumers
would unleash their pent-up demand for travel, eating out and
other activities, pivoting back to the COVID-battered services
sector.
But on Friday, IHS Markit turned those assumptions on their
head.
With its advance 'flash' take on its July PMI (purchasing
managers index) the global financial information firm showed the
expansion of the services sector unexpectedly losing some steam,
and a faster-than-anticipated acceleration of manufacturing
activity.
Services PMI unexpectedly declined 4.8 points
to a reading of 59.8, while manufacturing PMI
gained a point to 63.1, a more robust level than the consensus
projection.
Combined, the two data series result in a composite reading
of 59.7, a 4-point drop from June.
A PMI number above 50 indicates an expansion of activity
over the previous month.
"Some moderation of service sector growth in particular was
always on the cards after the initial reopening of the economy,
and importantly we’re now seeing nicely-balanced strong growth
across both manufacturing and services," writes Chris
Williamson, chief business economist at Markit.
“While the second quarter may therefore represent a peaking
in the pace of economic growth according to the PMI, the third
quarter is still looking encouragingly strong," Williamson adds.
“Inflationary pressures and supply constraints – both in
terms of labour and materials shortages - nevertheless remain
major sources of uncertainty among businesses, as does the delta
variant, all of which has pushed business optimism about the
year ahead to the lowest seen so far this year," he says.
Wall Street appeared to be enjoying the fourth day of
risk-on sentiment in mid-morning trading, with the three major
U.S. stock indexes rallying their way to weekly gains.
But chips, smallcaps and energy stocks
have had better days.
(Stephen Culp)
*****
INFLATION IN FOCUS FOR NEXT WEEK’S FOMC MEETING (957
EDT/1357 GMT)
All eyes with be on whether the Federal Reserve expresses
any new concerns about high inflation when it concludes its
two-day meeting on Wednesday.
Fed officials including Chairman Jerome Powell have played
down high inflation readings as likely transitory due to
businesses reopening from COVID related shutdowns.
However, “since the last FOMC meeting, growth and labor
market data have improved further and inflation has continued to
rise sharply above the Fed’s 2% target,” economists at Credit
Suisse said in a note on Friday.
“Chair Powell is likely to sound more cautious about upside
inflation risks and suggest that the Fed is ready to respond in
case there are signs of more persistent inflation or a
concerning increase in inflation expectations,” the economists
said.
Powell may also indicate that Fed officials have discussed
when it will be appropriate to reduce bond purchases, though the
U.S. central bank is not expected to announce any plans at next
week’s meeting.
“Forward guidance on interest rates and asset purchases
should remain unchanged, but Powell is likely to reiterate that
‘substantial further progress’ toward the committee’s goals is
still a ways off,” Credit Suisse said.
(Karen Brettell)
*****
U.S. STOCK INDEX FUTURES RISE, LIFTED BY EARNINGS (0900
EDT/1300 GMT)
U.S. stock index futures are higher early on Friday, with
upbeat results from social media companies including Twitter
lifting sentiment.
Snap Inc also is higher after it beat analysts'
expectations on revenue in the second quarter.
On the flip side, chip maker Intel said it still
faces supply chain constraints.
Investors have been looking to earnings reports and
corporate guidance too for clues on the economy's health.
Here is the early U.S. market snapshot:
(Caroline Valetkevitch)
*****
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