Stock Market Update

[BRIEFING.COM] The stock market opened to broad-based losses in response to decreasing rate cut expectations, a rare earnings miss from Walmart (WMT 97.51, -5.06, -4.93%), and economic data that stokes stagflation concerns. 

The S&P 500 (-0.5%), Nasdaq Composite (-0.6%), and DJIA (-0.5%) have spent the majority of the session in negative territory, with their base levels acting as resistance. 

Stocks have largely retreated as September rate cut expectations have steadily eroded throughout the week. The current probability of a 25-basis-point rate cut at the September FOMC meeting stands at 71.5%, down from 82.4% yesterday and 92.1% a week ago, according to the CME FedWatch tool. 

Kansas City Fed President Jeffrey Schmid (voting FOMC member) said in a CNBC interview that there is still plenty of data to come out between the next meeting, and he is not in a hurry to cut rates. 

Separately, Bloomberg reported that the DOJ has urged Fed Chair Jerome Powell to remove Fed Governor Lisa Cook (voting FOMC member) from the committee amid allegations of mortgage fraud. 

Today's economic data also prompted concerns, as higher-than-expected initial jobless claims (235,000; Briefing.com consensus 222,000), continuing jobless claims (1.972 million) rising to their highest levels since November 2021, and a softer Philadelphia Fed Index (-0.3; Briefing.com consensus 9.0) hint at stagflation. 

Eight S&P 500 sectors trade in negative territory, with the consumer staples sector (-1.2%) facing the brunt of the losses. Walmart (WMT 97.51, -5.06, -4.93%) posted its first EPS miss since May 2022, with tariffs squeezing the company's bottom line despite increased revenues. The SPDR S&P Retail ETF is down 1.3% today as the effects have permeated through the retailer space. 

Mega-caps are weaker again today, though not as drastically as yesterday. The consumer discretionary (-0.9%), communication services (-0.4%), and information technology (-0.4%) sectors all trade lower due to weakness in their largest names.

The Vanguard Mega Cap Growth ETF is down 0.4% today, which is in line with both the market-weighted S&P 500 (-0.5%) and the S&P 500 Equal Weighted Index (-0.4%). 

Meanwhile, the energy sector (+0.6%) posts the widest gain as oil prices have increased $0.75 to $63.46 per barrel, and the health care sector (+0.3%) benefits from strength in some of its larger names. 

Reviewing today's data:

• Weekly Initial Claims 235K (Briefing.com consensus 222K); Prior 224K, Weekly Continuing Claims 1.972 mln; Prior was revised to 1.942 mln from 1.956 mln
  • The key takeaway from the report is that it covers the period in which the survey for the August employment report is completed. The jump in initial and continuing claims is apt to keep economists' nonfarm payroll estimates in a soft growth zone.
• August Philadelphia Fed Index -0.3 (Briefing.com consensus 9.0); Prior 15.9
• August S&P Global U.S. Manufacturing PMI - Prelim 53.3; Prior 49.8
• August S&P Global U.S. Services PMI - Prelim 55.4; Prior 55.7
• July Existing Homes Sales 4.01 mln (Briefing.com consensus 3.92 mln); Prior 3.93 mln
  • The key takeaway from the report is that a moderation in selling prices, coupled with an increase in inventory (the highest since May 2020), helped boost sales despite the persistence of higher mortgage rates.
• July Leading Indicators -0.1% (Briefing.com consensus -0.1%); Prior -0.3%