Stock Market Update

[BRIEFING.COM] For the second consecutive day, early gains in the stock market pushed the S&P 500 (-0.3%) and Nasdaq Composite (-0.4%) to record intraday highs, though a late morning sell-off proved to be insurmountable and saw the major averages close in negative territory, unable to secure record closing highs.

At peak levels the S&P 500 established a new record high at 6,409.26, and the Nasdaq secured a record of its own at 21,303.96.

Around the same time, NVIDIA (NVDA 175.51, -1.24, -0.7%) also pushed to a new record high of $179.38 following earlier headlines that the company purchased 300,000 H20 chips from Taiwan Semiconductor Manufacturing (TSM 241.33, -1.42, -0.6%) to satisfy a notable demand in China.

A sell-off ensued from the record high levels, ultimately sending the information technology sector (-0.2%) into negative territory for the day after rising 0.7% in the early going. The PHLX Semiconductor Index finished with a modest gain of 0.2%.

The industrials (-1.1%), health care (-0.8%), consumer discretionary (-0.7%), financials (-0.6%), materials (-0.3%), and communication services (-0.4%) sectors round out the seven sectors that finished in negative territory. 

While equity futures were initially buoyed by today's sizable batch of earnings reports, a lack of major developments on the trade front or elsewhere left the market unable to rebound from the late morning sell-off.

A cohort of blue-chip stocks also retreated following their earnings before the open, including UPS (UPS 90.84, -10.74, -10.6%), UnitedHealth (UNH 261.37, -20.75, -7.4%), Royal Caribbean (RCL 334.38, -17.62, -5.0%), Nucor (NUE 140.68, -3.84, -2.6%), and Merck (MRK 82.69, -1.37, -1.6%).

Stocks of all sizes retreated, as evidenced by similar losses between the Vanguard Mega Cap Growth ETF (-0.6%) and the Russell 2000 (-0.7%). The S&P Mid Cap 400 (-0.2%) outperformed the broader market but still closed with a modest loss.

Despite the broad-based losses, the real estate (+1.7%), utilities (+1.2%), energy (+1.0%), and consumer staples (+0.8%) sectors captured healthy gains today.

The energy sector benefitted from an increase in crude oil prices that settled today's session $2.47 higher (+3.7%) at $69.22 per barrel. The price increase followed comments from President Trump on Air Force One that Russia will face secondary sanctions if it does not stop the Ukraine war by the deadline, which is 10 days from now.

Meanwhile, the real estate and utilities sectors were supported by a strong rally in treasuries that sent yields on the 10-year note and the 30-year bond to their lowest levels since early July, back below their respective 50-day moving averages, with the 10-year yield also sliding past its 200-day moving average. The 2-year note yield settled down five basis points at 3.88%, and the 10-year note yield settled down nine basis points at 4.33%.

The rally preceded tomorrow's release of the FOMC policy statement, which is not expected to call for a rate cut, but the decision is not expected to be unanimous, with at least one policymaker dissenting.

In addition to the Fed statement, the market will also receive Advance Q2 GDP readings as well as another hefty batch of earnings reports, all of which could either reinforce today's downward trend or provide the catalyst for a renewed push toward record highs.

• Nasdaq Composite: +9.3% YTD
• S&P 500: +8.3% YTD
• DJIA: +4.9% YTD
• S&P 400: +2.7% YTD
• Russell 2000: +0.6% YTD

Reviewing today's data:

• The Conference Board's Consumer Confidence Index rose to 97.2 in July (Briefing.com consensus 95.5) from an upwardly revised 95.2 (from 93.0) in June. In the same period a year ago, the index stood at 101.9.
  • The key takeaway from the report is that the improvement was driven by an increase in the expectations index, though that index remains below a level that is typically indicative of a recession ahead.
  • The Present Situation Index fell to 131.5 from 133.0.
  • The Expectations Index rose to 74.4 from 69.9, remaining below 80, which is a level that typically signals recession ahead.
  • Average 12-month inflation expectations fell to 5.8% from 5.9%.
• Job openings for June decreased to 7.437 million from a revised 7.712 million (from 7.769 million) in May.
• The FHFA Housing Price Index was down 0.2% in May (Briefing.com consensus -0.2%) after a revised reading of -0.3% (from -0.4%) in April.
• The S&P Case-Shiller Home Price Index was up 2.8% in May (Briefing.com consensus 3.0%) after increasing 3.4% in April.
• The advance goods trade deficit reached $85.9 bln in June, up from a revised $96.4bln (from $96.66 bln) deficit in May.Advance Retail Inventories were up 0.3% in June after increasing a prior unrevised 0.3% in May, while advance Wholesale Inventories were up 0.3% in June after a prior 0.3% decrease in May.