The S&P 500 and Dow eked out a fourth-straight day of record closes, supported by mostly positive quarterly reports from corporates, though optimism was hurt by data showing the Delta variant is weighing on consumer sentiment.
The Dow Jones Industrial Average ended the week at a closing record of 35,515.38, while the S&P 500 added 0.2%, to clinch another closing record of 4,468. The Nasdaq closed flat.
The University of Michigan Consumer Sentiment index slumped to a reading of 70.2 in the preliminary August survey from 81.2 in July, the weakest reading since December 2011.
The fall in consumer optimism over the economy comes as the Delta variant has scaled back expectations about a return to normal.
"There is little doubt that the pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion," according to the University of Michigan. "The surge in negative economic assessments […] reflects an emotional response, mainly from dashed hopes that the pandemic would soon end."
Economists agree, and believe that consumers are weighing up the realization that the end of the pandemic still has a way to go.
"The promise of vaccines and a return to something at least resembling pre-COVID "normal" has shifted towards concerns that fear of being sick, masks, social distancing, virtual/distance learning, work from home, an endless stream of booster shots and seeing relatives through glass will instead be the norm going forward," Jefferies (NYSE:JEF) said in a note.
Signs the consumer, which makes up two-thirds of the economy, is growing wary of the economy, sent U.S. Treasury yields sharply lower, and weighed on financials as banking stocks slipped.
JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) were down more than 1%.
Still, the broader market was supported by rising tech stocks and better-than-expected quarterly results from corporates including Disney .
Walt Disney (NYSE:DIS) reported Thursday third-quarter results that beat analysts' forecasts, led by better-than-expected Disney+ streaming performance and a return to profit in its theme parks and resorts business.
Some on Wall Street see challenges for Disney in its fiscal fourth quarter amid a lack of new content to meaningful grow subscribers, but are bullish over the longer term as its parks business continues to recover.
"We remain bullish that core Disney+ growth will accelerate in FY22 with rest of world market launches and ramping original content releases, while a continued Parks recovery should increase anticipation of its long-term profit potential," Credit Suisse (SIX:CSGN) said in a note.
Rocket Companies (NYSE:RKT) reported weaker-than-expected second-quarter results was offset by upbeat third quarter guidance, sending its shares more than 10% higher.
Airbnb (NASDAQ:ABNB) recovered most of its losses to closed 1% higher even after it warned of volatility ahead due to the Delta variant.
The record setting week for the broader market comes amid lower trading volumes, but key events next week including remarks from Federal Reserve Chair Jerome Powell on Tuesday and the release of the Fed's June meeting minutes on Wednesday could provide fresh impetus for market direction.
Looking ahead, investors continue to believe the broader market will continue to grind higher, led by cyclical sectors of the market as the economy continues its transition from a pandemic-induced recession.
"We'll trend higher into the end of the year and most likely lead by cyclicals," Michael Skillman, Chief Executive Officer at Faith Investor Services told Investing.com in an interview on Friday. The S&P 500 had a very strong earnings season in the second quarter, retailer sentiment is strong and some of the more cyclical areas of the economy have really picked up, albeit from a very depressed level last year." "That's why I'm generally constructive on cyclicals," he added.