Stock Market Update

[BRIEFING.COM] The stock market registered solid gains in a broad advance. The Dow Jones Industrial Average rose 1.4%, the S&P 500 settled 1.6% higher, the Nasdaq Composite registered a 2.3% gain, and the Russell 2000 climbed 2.4%. 

The volatile action exhibited thus far in August was precipitated by a July jobs report that stirred concerns about a weakening economic environment and labor market. So, today's release of economic data that had the market feeling good about the economic environment and labor market invited strong buying activity. 

Market participants were reacting to a much better than expected Retail Sales Report for July, which bodes well for consumer spending and earnings prospects, and a pleasing weekly jobless claims report, which calmed fears about a weakening labor market. 

Solid earnings results and commentary about the consumer from Walmart (WMT 73.18, +4.52, +6.6%), along with Cisco's (CSCO 48.53, +3.09, +6.8%) solid fiscal Q4 operating performance, contributed to the upside bias.

Just about everything participated in upside moves. Nine of the 11 S&P 500 sectors registered gains led by consumer discretionary (+3.4%) and information technology (+2.5%). The consumer discretionary sector also benefitting from a huge gain in Ulta Beauty (ULTA 365.80, +36.75, +11.2%) after Berkshire Hathaway reported a new position in the stock.

The only sectors that closed lower were the rate-sensitive real estate (-0.3%) and utilities (-0.02%) sectors amid rising market rates.

The 10-yr note yield jumped 11 basis points to 3.93% and the 2-yr note yield settled 15 basis points higher at 4.10% in a reflection of easing concerns about the economic outlook.

• Nasdaq Composite:+17.2% YTD
• S&P 500: +16.2% YTD
• S&P Midcap 400: +8.2% YTD
• Dow Jones Industrial Average: +7.6% YTD
• Russell 2000: +5.4% YTD

Reviewing today's economic data:

• August Philadelphia Fed Index -7.0; Prior 13.9
• July Retail Sales 1.0% (Briefing.com consensus 0.3%); Prior was revised to -0.2% from 0.0%, July Retail Sales Ex-Auto 0.4% (Briefing.com consensus 0.2%); Prior was revised to 0.5% from 0.4%
  • The key takeaway from the report is that the increase in retail sales outpaced the rate of inflation in July, which connotes an understanding that the improvement in retail sales was driven by increased demand on top of price increases.
• Weekly Initial Claims 227K (Briefing.com consensus 232K); Prior was revised to 234K from 233K, Weekly Continuing Claims 1.854 mln; Prior was revised to 1.871 mln from 1.875 mln
  • The key takeaway from the report is that initial claims remain well below levels typically associated with recession conditions.
• July Import Prices 0.1%; Prior 0.0%
• July Import Prices ex-oil 0.1%; Prior 0.2%
• July Export Prices 0.7%; Prior was revised to -0.3% from -0.5%
• July Export Prices ex-ag. 1.0%; Prior was revised to -0.4% from -0.6%
• August NY Fed Empire State Manufacturing -4.7; Prior -6.6
• July Capacity Utilization 77.8% (Briefing.com consensus 78.6%); Prior was revised to 78.4% from 78.8%, July Industrial Production -0.6% (Briefing.com consensus 0.1%); Prior was revised to 0.3% from 0.6%
  • The key takeaway from the report is the understanding that it was depressed by Hurricane Beryl, which reduced industrial production by an estimated 0.3 percentage point and manufacturing output by an estimated 0.3 percent. Industrial production wasn't strong in July, but taking the effects of the hurricane into account, it wasn't as weak as it seems either.
• June Business Inventories 0.3% (Briefing.com consensus 0.2%); Prior 0.5%
• August NAHB Housing Market Index 39 (Briefing.com consensus 43); Prior was revised to 41 from 42

Friday's economic calendar features July Housing Starts and Building Permits at 8:30 ET, followed by the preliminary August University of Michigan Consumer Sentiment survey at 10:00 ET.