Markets Close Lower Despite Good Earnings and Data on Delta and Inflation Fears

Summary

- S&P 500 closed lower on the week at 4,327.16, which is down from 4,369.55 last week.

- Despite hovering near all-time highs, the chop of July is being felt acutely.

- We are expecting a continuing strong showing in earnings led by Epicenter sectors and reflationary names.

- Inflation uncertainty continues, but many adjacent markets are showing signs of immense strength, making us think the current volatility will likely be short-lived.

The S&P 500 had its first losing week after three up weeks in a row. Today witnessed some positive numbers in retail and earnings. Still, the continued prevalence of inflationary pressure, which markets aren’t sure is transitory or not, led to weakness that accelerated into the close. Over the last month, Technology has been the leader, and the Epicenter/Reflation trade underperformed. Interestingly, the day the highest inflation number in 13 years crossed the tape, bond yields pretty much hovered flat. We live in strange times for financial markets that certainly seem more characterized by anomalous events than historical correlations.

However, with all the complex drivers and unprecedented liquidity, some may doubt whether certain data provides an intelligible signal or just noise. Price discovery in deb...

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