Stock Market Update

[BRIEFING.COM] The stock market pulled back today as sharp losses in mega-cap and technology names outweighed strength in blue-chip stocks, which had briefly lifted the DJIA (flat) to a record high of 45,207.39 before retreating. The S&P 500 (-0.6%) also retreated today after a brief stint above its baseline, and the tech-heavy Nasdaq Composite (-1.5%) never saw positive territory.

Losses today were not particularly widespread. The information technology (-1.8%), communication services (-1.2%), consumer discretionary (-0.4%), and energy (-0.2%) sectors were the only sectors that retreated, but a clear trend of mega-cap underperformance had an outsized effect on the market.

The technology sector finished as the worst-performing S&P 500 sector, facing significant pressure in its largest chipmaker components, NVIDIA (NVDA 175.64, -6.37, -3.50%) and Broadcom (AVGO 294.91, -10.85, -3.55%), while Microsoft (MSFT 509.77, -7.33, -1.42%) and Apple (AAPL 230.56, -0.33, -0.14%) also lost ground. Today's losses trimmed the sector's month-to-date gains to a meager 0.2%.

A strong showing from Intel (INTC 25.31, +1.65, +6.97%), after news that Softbank Group made a $2 billion investment in the company, was not enough to markedly improve the technology sector or the PHLX Semiconductor Index, which finished with a 1.6% loss.

Weakness in Meta Platforms (META 751.48, -15.89, -2.07%) and Alphabet (GOOG 202.49, -1.80, -0.88%) kept the communication services sector below its baseline for the entirety of the session, while Tesla (TSLA 329.31, -5.85, -1.75%) and Amazon (AMZN 228.01, -3.48, -1.50%) erased an early gain in the consumer discretionary sector.

The Vanguard Mega Cap Growth ETF retreated 1.6%. Meanwhile, the S&P 500 Equal Weighted Index (+0.4%) outpaced the market-weighted S&P 500 (-0.6%).

Separately, the energy sector saw a modest loss as crude oil futures settled 1.6% lower at $61.77 per barrel.

While the major averages closed with losses after a steady retreat, a solid performances across several other sectors mitigated some of the pressure the mega-caps created. The real estate (+1.8%), utilities (+1.0%), consumer staples (+1.0%), health care (+0.4%), materials (+0.5%), financials (+0.2%), and industrials (+0.2%) sectors closed with gains.

Sector performance indicates a rotation in play. Money was taken off the table, but not all of it left the room. Investors turned to more defensive stocks ahead of Fed Chair Powell's Friday address at the Jackson Hole Symposium.

A proclivity to protect against risk today also left small-cap stocks overlooked, with the Russell 2000 retreating 0.9%.

Additionally, the DJIA (flat) outperformed the S&P 500 (-0.6%) and Nasdaq Composite (-1.5%), aided by the positive response to Home Depot's (HD 407.14, +12.44, +3.15%) earnings report, which featured an earnings miss but a reaffirmation of the fiscal year outlook. Lowe's (LOW 256.36, +5.47, +2.18%), Target (TGT 105.36, +0.41, +0.39%), and TJX (TJX 134.62, +1.56, +1.17%) are set to report their earnings before the open tomorrow.

On the geopolitical front, Politico reported that the White House is planning a trilateral meeting between Presidents Trump, Putin, and Zelensky in Budapest, though the market has still largely ignored developments on this topic.

U.S. Treasuries climbed on Tuesday, reclaiming their modest losses from the start of the week. The 2-year note yield settled down two basis points to 3.75%, and the 10-year note yield settled down four basis points to 4.30%.

• Nasdaq Composite: +10.4% YTD
• S&P 500: +9.0% YTD
• DJIA: +5.6% YTD
• S&P Mid Cap 400: +2.1% YTD
• Russell 2000: +2.1% YTD

Reviewing today's data:

• Housing starts increased 5.2% month-over-month in July to a seasonally adjusted annual rate of 1.428 million units (Briefing.com consensus: 1.311 million), with single-unit starts up 2.8% and multi-unit starts up 9.9%. Building permits decreased 2.8% month-over-month to a seasonally adjusted annual rate of 1.354 million units (Briefing.com consensus: 1.390 million), with single-unit permits up 0.5% and multi-unit permits down 8.2%.
  • The key takeaway from the report is that there wasn't much strength in single-unit starts or permits, which is relatively disappointing in the context of a housing market that needs more affordable, single-family homes for sale. In fact, single-unit starts were down in all regions except the South (+13.2%).