* U.S. stock indexes end down, snap 3-week winning streaks
* Energy biggest loser among major S&P sectors; utilities up most
* Dollar, bitcoin gain; crude, gold dip
* U.S. 10-yr Treasury yield ~1.30%
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WALL STREET SINGS THE SUMMERTIME BLUES (1615 EDT/2015 GMT)
U.S. stocks ended a see-saw week with a sell-off, sending investors into the mid-summer weekend with renewed worries over mounting infections of the COVID-19 Delta variant and persistent inflation concerns.
All three major indexes, which began the week with record closing highs, skulked past the finish line to end below last Friday's close, each of them snapping three-week winning streaks.
Losses in Apple , Amazon.com shares weighed heaviest on the S&P and the Nasdaq.
Chips , transports and smallcaps - barometers of economic revival - fared worse than the broader market.
The fast-spreading COVID Delta variant, now the dominant strain of the disease and responsible for a worldwide surge in new cases, prompted Los Angeles to re-impose a mask mandate, reviving fears that the global health crisis is far from over.
A surprise gain in June retail sales was partly tempered by an larger-than-expected dip in University of Michigan's preliminary take July sentiment as mounting inflation expectations appear to have dampened the consumer's mood.
Market participants closed the book on the first week of second quarter earnings season, with a host of big banks generally breezing past estimates.
Of the 41 companies in the S&P 500 having posted results thus far, 90% have beat the Street, according to Refinitiv.
Next week the floodgates open with high-profile names like Netflix , Twitter , Johnson & Johnson , United Airlines and Intel , along with a host of industrials from Honeywell to Harley-Davidson expected to report.
On the economics side, a host of housing market data due next week - including NAHB, housing starts/building permits and existing home sales - should shine a spotlight on the erstwhile star sector of the pandemic recession recovery.
Here's your closing snapshot:
(Stephen Culp)
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BULLISH INVESTOR SENTIMENT DIPS BELOW HISTORICAL AVERAGE (1410 EDT/1810 GMT)
Investor optimism dampened last week to the lowest level since October and the bears started growling.
The latest report from the American Association of Individual Investors (AAII) showed bullish sentiment - or, expectations that the stock market will rise over the next six months - shed 4 percentage points to 36.2%, dipping below its 38% historical average.
The pessimists added share, with those who see the stock market losing value over the next six months growing to 26.8% of the total. Still, that bearish percentage still remains below its 30.5% historical level, where it's been for 23 weeks running.
With this, neutral sentiment - the belief that stocks will stay essentially unchanged - gained 1.7 percentage points to 26.8%, coasting above its 31.5% average for the 11th week out of the last 12.
Despite these moves, AAII vice president Charles Rotblut notes all three camps are "within their typical historical ranges."
As seen in the chart below, the net bull/bear balance now tilts 9.4 percentage points in favor of the bulls:
The most recent survey asked AAII members to share their reactions regarding the recent pullback in bond yields.
"Almost two out of five of respondents (39%) have negative comments about the pullback, citing concerns of inflation, low growth and low bond yields," Rotblut writes. "Many respondents also say these low yields are adversely affecting retirees’ portfolios, as retired individuals may need income from safe-haven investments such as bonds."
The remainder of the participants responded accordingly:
** 21% have no thoughts/the pullback is inline with expectations
** 16% view the pullback in positive light, citing potential increase of foreign investors hunting for higher yield and the possibility of a boost to consumer spending
** 12% believe the pullback is a temporary symptom of economic growth/recovery.
(Stephen Culp)
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RECENT WEAKNESS ADDS SOME SHINE TO MATERIALS (1301 EDT/1701 GMT)
Recent underperformance in the materials sector makes it attractive, Brian Belski, chief investment strategist at BMO Capital Markets, wrote in a note this week.
The sector has underperformed the overall market by about 12% since mid-May, and the price weakness along with solid earnings have pushed materials' relative valuations to 20-year lows, he wrote.
"A number of factors likely contributed to the decline with the most notable being the narrative of peak economic growth + inflation + policy support and the rotation out of cyclicals/value and into growth," he wrote.
"This pullback erased the YTD outperformance of Materials as the sector now lags the broader market by ~300bps this year and stands roughly 7% off its 52-week high (second-most after Energy)."
But Belski said this should be seen as an opportunity to add to stock positions in the group since fundamentals still support the sector. He noted that blended EPS growth for materials has continued its upward trend versus the S&P 500, helped by positive annual revisions momentum, and that "free cash flow generation has remained strong."
The sharp price decline has helped push relative valuations for materials down, and a further increase in commodity prices should be a tailwind for materials relative performance given their fairly strong correlation historically, he wrote.
BMO Capital Markets has an overweight recommendation on the materials sector.
(Caroline Valetkevitch)
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NOT YOUR GAMMA'S MARKET (1201 EDT/1601 GMT)
The July options expiration on Friday will change the market landscape and could clear the way for potentially wilder stock market gyrations, according to SpotGamma, a financial insights company specializing in options.
Nearly a third of Nasdaq 100 Triple Qs , SPDR S&P 500 ETF Trust iShares Russell 2000 ETF gamma and about a quarter of S&P 500 gamma is set to expire on Friday, SpotGamma estimates.
Options dealers are considered long or short gamma depending on whether they have bought or sold options. On expiration days, lapsing options tend to change the market picture as dealers' influence on the market is diminished.
When dealers are long S&P 500 Index gamma, rising stocks lead them to sell equities or futures, while a falling index would lead them to buy stocks or futures. This tends to dampen volatility since options dealer activity is counter to the market.
Conversely, under short gamma conditions, a falling market causes dealers to sell stocks and futures, while in rising markets they buy equities and futures, thereby exacerbating the market move.
"As per usual we think this all equates to higher volatility next week," SpotGamma founder Brent Kochuba, said in a note, referring to Friday's options expiration.
Kochuba, sees 4,345 on the S&P 500 as the "vol trigger" mark - a level where in a falling market long gamma positions switch to short gamma.
"As long as the SPX remains above the "vol trigger" it's “party on”," Kochuba said.
(Saqib Ahmed)
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RETAIL SALES, UMICH: INFLATION HARSHES THE BUZZ (1110 EDT/1410 GMT)
Market participants cruised into the weekend with a mixed bag of economic data riding shotgun and the summer's biggest hit - 'The Inflation Shuffle' by Powell and the Feds - blaring on the radio.
The good news is that receipts at U.S. retailers unexpectedly increased by 0.6% last month, according to the Commerce Department in a partial rebound from May's downwardly-revised 1.7% drop.
Analysts expected that drop to be extended by 0.4%.
The upside was constrained by the global chip shortage, which has thrown a monkey wrench into auto sales. Excluding cars, retails sales jumped by a more vigorous 1.3%.
With the exception of food and beverage services, the data set consists mainly of goods.
And as freshly jabbed consumers economically re-engage, demand is shifting from goods back to services, particularly customer-facing industries such as travel, leisure and entertainment.
"The great spending rotation saw households cut back on furniture, autos, sporting equipment and building material – categories that outperformed during the pandemic – while spending more freely at restaurants and bars, gas stations and electronic stores," writes Gregory Daco, chief U.S. economist at Oxford Economics.
But Alex Pelle, U.S. economist at Mizuho Securities, isn't quite as enthusiastic.
"On a real — that is inflation-adjusted — basis, retail sales are contracting for the third consecutive month," Pelle notes. "More spending is being captured by price increases instead of volume increases."
Core retail sales - which strips out autos, gasoline, building supplies and food services - saw a more robust rebound, bouncing to a 1.1% gain from last month's 1.4% contraction.
Core retail sales is closely related to the personal expenditures segment of GDP.
But enough about last month. Now it's July, and inflation is still a thing.
Consumers' near-term inflation expectations jumped 0.6 percentage points to 4.8%, helping to sour the overall mood.
In July, the University of Michigan's preliminary take on consumer sentiment unexpectedly dipped to a reading of 80.8 as opposed to the slight uptick to the consensus 86.5.
"Consumers' complaints about rising prices on homes, vehicles, and household durables has reached an all-time record," noted survey director Richard Curtin.
The expiration of enhanced unemployment benefits might have also played a supporting role.
"We’re guessing that the ending of enhanced unemployment benefits - announced or actual - in 26 Republican-led states has triggered an adverse reaction among consumers," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "People don’t like having money taken away from them."
Both 'current conditions' and 'expectations' components deteriorated.
Finally, another report from the Commerce Department showed unsold goods in the store rooms of U.S. businesses increased by 0.5% in May, inline with economist forecasts.
The gain builds on April's scant, though upwardly revised 0.1% growth.
The increase, however slight, bodes well for second-quarter GDP - the first glimpse of which is expected late in the month - as private inventories detracted 2.7 percentage points from the first quarter's net 6.4% quarterly annualized advance.
Wall Street reversed earlier gains, and by late morning trading all three major U.S. stock indexes were red, with chips
and transports seeing the worst of it.
(Stephen Culp)
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U.S. STOCKS OPEN WITH GAINS AFTER RETAIL SALES DATA (0941 EDT/1341 GMT)
Equities are modestly higher in the early portion of trading on Wall Street, led by tech to the upside while the recent weakness in the materials sector continues as the group is on track for its first weekly decline in four.
Retail sales for July were much stronger than expected, increasing by 0.6% versus expectations calling for a decline of 0.4%. A further look at the consumer is on deck in the form of the University of Michigan's preliminary July reading of consumer sentiment.
Below is your market snapshot:
(Chuck Mikolajczak)
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FOR FRIDAY'S LIVE MARKETS' POSTS PRIOR TO 0905 EDT/1305 GMT - CLICK HERE:
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