Markets closed down on Wall Street today: Dow -0.72%, S&P -0.40%, Nasdaq -0.10%, Oil +0.27%, Gold +0.49%.
Today’s markets were down because:
1) Obama/Boehner. Last week they were working together and everyone was confident that a budget deal was on its way, but when House Speaker Boehner walked out on talks on Friday, that no longer looked to be the case. Then last night, Obama addressed the nation, re-affirming his intention to veto any deal that didn’t include both tax revenue and spending cuts. Following his address, Boehner spoke, criticizing Obama’s inability to compromise while himself refusing to compromise with the president. The Treasury’s deadline is now only 7 days away, and there isn’t even a complete bill currently before the House or Senate, and yet investors aren’t panicking. Markets are down, but not as much as would be expected if the economy was about to be dealt as huge a blow as would be a government default on the debt (NYSE:TLT). Whether it’s because people don’t understand just what a default could mean for the economy, or because they are confident their lawmakers will come to a resolution in time, investors aren’t running scared. The current state of budget talks may be preventing markets from climbing excessively, but they don’t seem to be depressing them much either.
2) Earnings. Were it not for the weight of the debt ceiling, today’s markets may have been fared better. With 75% of S&P 500 (NYSE:SPY) companies beating earnings expectations in their latest quarters, this earnings season has been overwhelmingly positive, and points to increased spending that, if given the chance, could stimulate the economy into the recovery we’ve been waiting on. A lot of the the biggest earners during the latest quarter were tech companies, including Chinese Internet search company Baidu (NASDAQ:BIDU) with second quarter earnings climbing 95% over a year earlier, and Apple (NASDAQ:AAPL) reported net income twice that of the previous year.
3) New home sales. For the second month in a row, new home sales (NYSE:IYR) slipped in June, with the Census Bureau reporting an annual sales rate of 312,ooo new homes last month, down from 315,000 in May. That’s bad news for the housing market considering this time of year usually sees increasing sales. However, June sales were still up 1.6% over last year, so like most of our economic news of late, it’s effect on the markets hasn’t been wholly negative or positive. And Case-Shiller said housing prices actually rose month over month.
BONUS: Amazon (NASDAQ:AMZN) revenues rose 51% to $9.91 billion from the year earlier quarter. The stock is up 6.8% after hours. For the full earnings recap, check out Amazon.com, Inc. Earnings Cheat Sheet: Margins Suffer as Costs Rise, Profit Falls.