Wall Street stocks fall at the beginning of August

On Monday, Wall Street stocks lost some of their early gains and ended the day slightly lower, as investors got ready for another busy week of earnings and reports.

After an early gain, The S&P 500 fell and finished down 0.3 percent to 4,118.63. The Nasdaq dropped 0.2 percent while the Dow Jones Industrial Average dropped 0.1 percent. Stocks of smaller companies also lost some of their recent gains, pushing the Russell 2000 index down by 0.1 percent.

Across all sectors

Monday’s stock decline affected various sectors of the economy. Crude oil prices in the U.S. are down 4.8 percent, while Exxon Mobile lost 2.5 percent.

In general, bond yields fell. The ten-year Treasury’s yield, which impacts mortgage rates, fell 0.05 percent on Friday.

Banking’s JPMorgan Chase stocks fell one percent. Likewise, tech stocks fell 1.7 percent, and healthcare’s UnitedHealth Group slid 1.3 percent.

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These losses eclipsed the gains by consumer products companies and retailers. Procter & Gamble rose 2.9 percent, and Target rose 1.3 percent. Boeing gained an impressive 6.1 percent gain after its recent legal victory against federal regulators.

In addition, microchip companies like Qualcomm, Intel Corp, Micron Technology Inc and Nvidia Corp were down between 0.9% and 1.3%.

"Chip stocks are really exposed to Asia. Some of them have 70% of their sales, especially chip equipment companies, in that region so it's a big deal for them," Harbor Advisory chief investment officer Jack DeGan said, as per Reuters.

Before the fall

This subdued opening was a surprise after July’s impressive performance, where S&P 500 index reached its best position since November 2020. Instead of feeling optimistic, Wall Street traders are now cautious about what August may have in stock for them, said Lindsey Bell, Ally Invest’s chief markets and money strategist.

It remains too early to see where the markets will go from here.

Inflation and recession

According to a report released last week, the US economy shrank in the last quarter and may be heading into a recession.

As the markets begin to worry about rising interest rates and high inflation, stocks have been falling for most of the year. The anxiety is exacerbated by concern that central banks will hike up interest rates, which would push the economy into a recession.

While the markets welcome the Fed’s recent 0.75 percentage points interest rate, most worry that too aggressive a hike would bring a negative impact on the economy. The current rate is already at the highest level since 2018. An inflation gauge, closely watched by the Fed, rose 6.8 percent in June since last year, marking the biggest increase in four decades.

The future

This week, several major companies will begin releasing their earnings reports. These reports will provide insight to investors on the issue of inflation - specifically how it is impacting businesses and consumers.

Starbucks will report earnings on Tuesday, followed by CVS, the pharmacy chain, on Wednesday. As for other companies, most have reported their most recent earnings results. What the reports say is encouraging, with results that are better than expected.

However, these companies also reported a decrease in consumer spending and rising operational costs. To keep up profits, businesses have been increasing prices.

In the upcoming days, the Labor Department will release its June survey on labor turnover and job opening, as well as the highly-anticipated monthly employment report for July.