The S&P 500 slipped 2.0% last week largely due to weakness in the technology sector. Semiconductor stocks fell sharply on Wednesday amid reports that the Biden administration is considering further restrictions on exports of critical chipmaking equipment to China. The sector came under additional pressure on Friday following a software glitch that caused widespread disruptions to computer systems throughout the world. Smaller company shares and value sectors of the market including energy, financials and real estate helped to partially offset the losses in technology, continuing a pattern in place since favorable inflation reports were released on July 11th. Internationally, the developed and emerging markets fell 2.4% and 3.0%, respectively.

• The yield on the 10-year U.S. Treasury notes increased 0.06% to settle at 4.24% on Friday. Better than expected consumer spending in June and speculation about the fiscal and inflation implications of a potential Trump presidential victory contributed to the rise in rates. The Bloomberg Aggregate Bond Index slipped 0.3% but the Bloomberg U.S. Municipal Bond Index gained 0.2%.
• The Commerce Department reported retail sales held steady in June. This came as an upside surprise as the consensus forecast was for a decline of 0.3%. In another surprise, May retail sales were upwardly revised to 0.3% from 0.1%.
• The second quarter earnings reporting period is proceeding well. As of this writing, approximately 14% of S&P 500 companies have reported their results with 83% of them above consensus earnings per share (EPS) estimates. A clearer picture of overall S&P 500 earnings will emerge this week, with another 30% of S&P 500 companies scheduled to report.

Next week, investor attention will remain focused on earnings and the Fed’s preferred measure of inflation – the U.S. Personal Consumption Expenditure Core Price Index. The Bureau of Economic Analysis will release this report on Friday. The consensus forecast is that it ticked lower in June, on a year-over-year basis, to 2.5% from 2.8% in May. Estimates are tightly clustered around the consensus forecast, ranging from a low of 2.4% to a high of 2.6%. A surprise of 0.1% or more in either direction would likely trigger a strong reaction in the markets.

• Other reports of note include S&P Global’s preliminary July U.S. Purchasing Manager Indexes (PMI) scheduled for release on Wednesday. The PMI reports, which gauge conditions in the services and manufacturing sectors of the economy, are expected to point to a continuation of expansionary conditions during the month.