Stock Market Update

[BRIEFING.COM] The stock market settled near session lows, leaving the major indices with solid declines. The Dow Jones Industrial Average finished 1.2% lower, the S&P 500 logged a 1.4% loss, the Nasdaq Composite fell 2.3%, and the Russell 2000 sank 3.0%.

The downside bias was driven by growth concerns following some disappointing economic data this morning. 

Weekly initial jobless claims -- a leading economic indicator -- increased to 249,000 (Briefing.com consensus 233,000) from 235,000 last week, reflecting some softening in the labor market that may weaken discretionary spending. The ISM Manufacturing Index showed weakening in the manufacturing sector, dropping further into contraction territory to 46.8% in July (Briefing.com consensus 48.5%) from 48.5% in June. 

This morning's data wasn't all disappointing, though. The lineup also featured a welcome combination of higher-than-expected preliminary Q2 productivity growth (actual 2.3%; Briefing.com consensus 1.7%) and smaller-than-expected unit labor cost growth (actual 0.9%; Briefing.com consensus 1.7%).  

Still, growth concerns steered price action in the bond and equity markets. The 10-yr note yield settled below 4.00%, down 13 basis points to 3.98%. The 2-yr note yield settled 18 basis points lower at 4.16%.

The drop in yields boosted rate sensitive areas of the market like the real estate (+1.6%) and utilities (+1.9%) sectors. The communication services sector also outperformed the index, jumping 0.9% due to gains in shares of Meta Platforms (META 497.74, +22.91, +4.8%). 

The heavily-weighted information technology sector registered the largest decline, dropping 3.4%. Weakness in the semiconductor space weighed on the info tech sector and led the PHLX Semiconductor Index (SOX) to close 7.1% lower.

Market participants will be focused on the July Employment Situation report tomorrow, which is released at 8:30 ET, and implications for Fed policy.

• Nasdaq Composite:+14.5% YTD
• S&P 500: +14.2% YTD
• S&P Midcap 400: +9.0% YTD
• Russell 2000: +7.9% YTD
• Dow Jones Industrial Average: +7.1% YTD

Reviewing today's economic data:

• Weekly Initial Claims 249K (Briefing.com consensus 233K); Prior 235K; Weekly Continuing Claims 1.877 mln; Prior was revised to 1.844 mln from 1.851 mln
  • The key takeaway from the report is the rising level of initial claims -- a leading indicator -- which connotes some softening in the labor market that is expected to curtail discretionary spending activity.
• Q2 Productivity-Prel 2.3% (Briefing.com consensus 1.6%); Prior was revised to 0.4% from 0.2%; Q2 Unit Labor Costs-Prel 0.9% (Briefing.com consensus 1.7%); Prior was revised to 3.8% from 4.0%
  • The key takeaway from the report was the moderation in unit labor costs, which the Fed is eyeing closely. Unit labor costs increased 0.5% over the last four quarters, which is the lowest rate since the third quarter of 2019.
• July S&P Global US Manufacturing PMI - Final 49.6; Prior 49.5
• June Construction Spending -0.3% (Briefing.com consensus 0.1%); Prior was revised to -0.4% from -0.1%
  • The key takeaway from the report was that construction spending was soft across both the private and public sectors, reflecting weaker demand patterns that are part of a softening economy.
• July ISM Manufacturing Index 46.8% (Briefing.com consensus 48.5%); Prior 48.5%
  • The key takeaway from the report is that it conveys clear weakness in the manufacturing sector that is a byproduct of subdued demand.

Looking ahead to Friday, the July Employment Situation report will be released at 8:30 ET. Other data include June Factory Orders at 10:00 ET.