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Communication Services, Consumer Discretionary, and Tech Sectors Push S&P to New Highs

Weekly Update – July 23, 2021

  • The S&P 500 index rose 2% last week, wiping out last week’s decline and sending the market benchmark to fresh record highs, as many sectors including communication services and consumer discretionary were boosted by better-than-expected Q2 financial results.
  • The market benchmark ended Friday’s session at 4,411.79, up from last Friday’s closing level of 4,327.16 and representing a new closing high. The index also set a fresh intraday high Friday at 4,415.18.
  • In the week prior, the S&P 500 fell 1% amid worries about inflation. The index continued to drop Monday on increasing concerns about the rise in COVID-19 cases amid the spread of the highly contagious Delta variant of the virus. But the index recouped those losses over the remainder of the week as more Q2 earnings reports beat expectations.
  • With just five sessions remaining in July, the S&P 500 is now up 2.7% so far this month. It is up 17% in 2021.
  • The communication services sector posted the largest gain last week, up 3.2%, followed by a 2.9% increase in consumer discretionary and a 2.8% rise in technology. Just two sectors were in the red for the week: utilities, down 0.9%, and energy, down 0.4%.
  • Among the gainers in communication services, shares of Interpublic Group (IPG) rose 12% for the week as the advertising and marketing services company reported Q2 adjusted earnings per share and revenue above year-earlier results and analysts’ expectations.
  • Also boosting communication services, shares of Twitter (TWTR) climbed 8%. The microblogging platform provider swung to a higher-than-expected Q2 adjusted profit per share on revenue that climbed more than expected from the year-earlier period. Twitter also forecast Q3 revenue above the Street consensus view.
  • Chipotle Mexican Grill (CMG) was among the stocks lifting the consumer discretionary sector. Its shares jumped 17% on the week as the restaurant chain reported Q2 results above those from a year earlier as well as analysts’ expectations, prompting many analysts to raise their share price targets.
  • Domino’s Pizza (DPZ) was another strong gainer in consumer discretionary. The pizza chain reported fiscal Q2 results that topped consensus estimates amid continued comparable sales momentum. Shares climbed 8.9%.
  • In the technology sector, shares of Salesforce (CRM) rose 4.1% last week as the customer relationship management technology company said it completed its acquisition of Slack Technologies, the operator of a digital platform for business communication, following the closure of a Justice Department probe into the deal.
  • On the downside, the utilities sector’s decliners included Atmos Energy (ATO), whose shares fell 1.8% on the week. Morgan Stanley cut its price target on the stock to $119 from $121 but maintained its overweight rating.
  • Next week’s earnings calendar will feature quarterly earnings reports from companies including Hasbro (HAS) and Otis Worldwide (OTIS) on Monday; 3M (MMM), General Electric (GE), Alphabet (GOOGL) and Apple (AAPL) on Tuesday; Pfizer (PFE), Boeing (BA), McDonald’s (MCD) and Facebook (FB) on Wednesday; Altria Group (MO) and Amazon.com (AMZN) on Thursday; and Colgate-Palmolive (CL), Procter & Gamble (PG) and Caterpillar (CAT) on Friday.
  • On the economic data front, next week will offer several updates on housing, with June new home sales due Monday, the May S&P Case-Shiller home price index as well as Q2 housing vacancies on Tuesday, and the June pending home sales index on Thursday. Other data due next week include July consumer confidence on Tuesday and June consumer spending and core inflation on Friday.
  • Also in focus next week will be the two-day Federal Open Market Committee meeting concluding Wednesday.
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