February 26, 2021

Stocks Fall Again on Consumer Data

As voting on the debt ceiling moved to the Senate on Tuesday, Wall Street took another step back.

Stock traders were focusing on American consumer spending and income as economists try to gauge the strength of the economy’s ability to bounce back after last week’s disappointing G.D.P report.

In early trading, the Standard Poor’s 500-stock index was down 8.47 points, or 0.66 percent. The Dow Jones industrial average was off 68.64 points, or 0.57 percent, and the Nasdaq index fell 5.56 points, or 0.20 percent.

New data showed that nominal personal income inched up by 0.1 percent in June and personal spending fell 0.2 percent. Wage and salary income, central to the ability of consumers to open their wallets, was unchanged in June from 0.2 percent in May, its smallest rise this year.

“With consumers still facing serious headwinds from a deteriorating housing sector, considerable debt burdens, and high costs for food and energy, the income generated by labor market recovery is absolutely critical,” said Joshua Shapiro, the chief United States economist for MFR, in a research note. “Without significant improvement in the labor market, consumer spending and hence overall real G.D.P. growth will prove disappointing in coming quarters.”

While negotiations on lifting the nation’s borrowing limit have loomed over the markets for weeks, any resolution of the debt ceiling with a Senate vote on Tuesday would still not guarantee the country would retain its sterling credit rating. And the uncertainty is compounded by the nation’s economic challenges, which are also likely to continue to press upon investors.

The broader market as measured by the S.P. index is down more than 4 percent over the last six consecutive days of declines, as of Monday’s close, and the Dow marked seven consecutive trading days of declines that also brought that index down more than 4 percent.

“The challenges that we are facing economically are that the hits just keep coming,” Lawrence Creatura, portfolio manager at Federated Investors, said. “We do have somewhat of a resolution to our budgetary impasse but that does not overwhelm the fact that economically speaking that the data continues to deteriorate.”

Already, some investors were bracing for Friday, when the Labor Department releases its national report on jobs, with estimates that the economy will add 85,000 nonfarm payrolls for its July tally, according to a Bloomberg survey, compared with the 18,000 tacked on to payrolls in June.

“This is a single-variable economy,” said Mr. Creatura. “And that dominant statistic is the jobs data. That is the number that matters, the single number that matters.”

Still, one bright spot might be the corporate sector. Equities have benefitted so far this year because of record profits.

“Repairing our balance sheets as a corporation and as a nation; that process of repair and healing is occurring,” said Mr. Creatura. “The nature of it is that it is slow, and we are all impatient for a full return to a robust economy, but it takes time.”

Early on Tuesday, the benchmark 10-year Treasury was at 2.72 percent, compared with 2.75 percent late on Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=c157c541ecdda8760016846fecd35e05

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