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Dow closes lower on weak consumer sentiment data

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Stocks gave up early gains after a U.S. consumer sentiment index fell to 73.2 in July from 78.1, compared with expectations of 78.6

Stocks eked out modest gains Friday as investors reacted to disappointing consumer sentiment data and gauged the potential for additional fiscal stimulus in the U.S. and Europe while COVID-19 cases continue to climb.

The Dow closed at 26,671.95, down 62.76 points, or 0.23%, while the S&P 500 added 9.16 points, or 0.28%, to close at 3,224.73. The Nasdaq Composite gained 29.36 points, or 0.28%, ending the week at 10,503.19.

The Dow on Thursday fell 135.39 points, or 0.5%, to close at 26,734.71, while the S&P 500 shed 10.99 points, or 0.3%, to close at 3,215.57. The Nasdaq finished at 10,473.83, down 76.66 points, or 0.7%.

For the week, the Dow finished 2.3% higher, the S&P 500 booked a gain of 1.3%, and the Nasdaq lost 1.1%.

Stocks gave up early gains to turn mixed after a U.S. consumer sentiment index fell to 73.2 in July from 78.1, compared with expectations for a reading of 78.6.

In short, the index weakened in early July as sentiment soured, no doubt reflecting a surge in virus cases that is once again restricting activity and clouding the outlook, especially as it relates to job prospects, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, in a note.

Sentiment will likely remain subdued in the absence of a more substantial health response that will result in better virus containment and prevent repeated closures that will cause more permanent damage to the labour market, she said.

The U.S. posted a record of more than 70,000 new coronavirus cases in a single day Friday, the highest reported by any country since the start of the outbreak. The U.S. now has 3.58 million cases, or about a quarter of the global total, and 138,360 deaths.

The continued rise in COVID-19 cases in the U.S. has been partly offset by optimism over scope for additional fiscal stimulus. The White House and lawmakers face increasing pressure to come up with an additional fiscal stimulus plan ahead of the expiration of supplemental unemployment benefits at the end of July.

Further fiscal stimulus could give the bull market fresh legs, with equities having already priced in the current unprecedented monetary policy support, said Han Tan, market analyst at FXTM, in a note.

Meanwhile, European Union leaders on Friday kicked off a two-day summit aimed at reaching an agreement on a €750 billion recovery fund.

Should fiscal policy makers disappoint and deny stock bulls the fuel they desire, we could see the rapid erosion of gains from recent months, Tan said.

Meanwhile, the Federal Reserve on Friday announced it had expanded its Main Street Lending Program to include nonprofit organizations.

In other U.S. economic data, U.S. housing starts came in at a 1.19 million seasonally adjusted annual rate in June, the Commerce Department said Friday, a 17% increase from May. Permits for newly-built homes rose 2.1% between May and June to a seasonally adjusted annual rate of 1.24 million.

One of the ironies of this recession is that the weakest part of the economy in the previous recession — housing — is now one of the shining stars in an otherwise challenging year, said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

The Shanghai Composite Index rose 0.1%, while the CSI 300 Index gained 0.6%. Japan’s Nikkei 225 Index rose 0.3%, while the Hang Seng Index in Hong Kong gained 0.5%.

The pan-European Stoxx 600 Europe Index closed up 0.2%, at 372.71, while London’s FTSE 100 Index added 0.6% to close at 6,290.30.

Bond yields rose, with the yield on the 10-year Treasury note up about two basis points to 0.63%. Bond yields and prices move in opposite directions.

The ICE U.S. Dollar Index a measure of the U.S. currency against a basket of six major rivals, fell 0.4%.

August West Texas Intermediate oil fell 16 cents, or 4%, to settle at $40.59 a barrel on the New York Mercantile Exchange. Gold edged 0.5% higher to settle at $1,810.

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