Stock Market Update

[BRIEFING.COM] The stock market had its strongest session of the week today, with earnings report optimism and the announcement of trade deals with the EU and Japan propelling the S&P 500 (+0.8%) to a new all-time intraday (6,360.64) and closing (6,358.91) high. 

Equity futures were higher in response to President Trump's announcement of a finalized trade deal with Japan, which featured a 15% tariff on Japanese imports, an investment of $550 billion into the U.S., and an opening of Japan's markets to rice and auto imports from the U.S.

Stocks got off to a decent start in response but rose precipitously around 12:00 ET when Financial Times reported that the U.S. and the EU were close to finalizing a trade agreement, also with a 15% tariff.

Increased buying activity following the report reflected the market's comfort with the 15% tariff rates for key trade partners, which are notably lower than the 30% proposed tariffs that were to go into effect August 1.

The trade news was enough to reverse a second consecutive day of early sluggishness in the technology sector (+0.7%), with its early losses limiting gains in the major averages for most of the morning. 

The sector faced early pressure in its chipmaker components following Texas Instruments (TXN 186.25, -28.67, -13.3%) earnings report after the close yesterday, which saw the company beat EPS expectations, though uncertainty around future growth prompted management to speak in a more cautious tone during the earnings call.

While the sector shed its early losses, chipmakers remained a point of relative weakness, with the PHLX Semiconductor Index finishing flat for the day. 

There were some notable beneficiaries in the wake of earnings, however. The health care sector (+2.0%) was today's top performer and widened its gains to 3.3% week to date.

Thermo Fisher (TMO 466.53, +38.91, +9.1%) beat EPS expectations by $0.13, and added to yesterday's strong performance among CRO services companies.

The Industrials sector (+1.8%) also finished among the top, as GE Vernova (GEV 629.56, +80.57, +14.7%) and Lennox Int'l (LII 661.51, +41.54, +6.7%) both captured nice gains today after beating EPS expectations and issuing upside guidance. 

In total, nine sectors finished in positive territory, with only the defensive utilities (-0.8%) and consumer staples (-0.1%) ending the day with losses. 

Buying activity was notably prevalent across stocks of all sizes.

Small-cap and mid-cap stocks widened their gains from yesterday, with Russell 2000 (+1.5%) and S&P Mid Cap 400 (+0.9%) outperforming.

Mega-cap stocks improved their position, with the Vanguard Mega Cap Growth ETF closing with a gain of 0.7%, after a 0.6% loss yesterday.

If yesterday's trade marked a rotation into value stocks from growth stocks, today's session reflected a more bullish attitude that saw the market emboldened by earnings data and trade developments alike. 

U.S. Treasuries retreated on Wednesday, snapping their streak of three consecutive days of gains. Treasuries ranged near their opening lows during the first couple hours of action, slipping to fresh lows in the wake of reports about the impending deal with the EU.

The selling was met with an afternoon bounce, which followed the completion of a strong $13 billion 20-year bond reopening. Late trade saw a fresh low in the 2-yr note, while longer tenors finished a bit above their worst levels of the session, with the 10-yr yield back above its 50-day moving average (4.411%).

The 10-year note yield settled up five basis points to 4.39%.

• Nasdaq Composite: +8.9% YTD
• S&P 500: +8.1% YTD
• DJIA: +5.8% YTD
• S&P 400: +3.12% YTD
• Russell 2000: +2.38% YTD

Reviewing today's data:

• Existing home sales decreased 2.7% month-over-month in June to a seasonally adjusted annual rate of 3.93 million (Briefing.com consensus 4.00 million) from a revised 4.04 million (from 4.03 million) in May. Sales were unchanged on a year-over-year basis.
  • The key takeaway from the report is that the median home sales price continued growing in June even though sales decelerated, which puts the spotlight on housing affordability at a time when mortgage rates remain high.
• The weekly MBA Mortgage Index rose 0.8% after falling 10.0% a week ago. The Purchase Index was up 3.5% while the Refinance Index fell 2.6%.
• Weekly crude oil inventories decreased by 3.17 million barrels after decreasing by 3.86 million barrels a week ago.