Stock Market Update

[BRIEFING.COM] The stock market mostly retreated today following some expected profit-taking after Friday's record high levels, though strength in mega-cap and tech names kept losses in the major averages modest.

The tech-heavy Nasdaq Composite (-0.2%) had the best showing of the major averages, while the S&P 500 (-0.4%) and DJIA (-0.8%) closed lower.

Nine S&P 500 sectors finished in negative territory, with the defensive consumer staples (-1.6%), health care (-1.4%), and utilities (-1.2%) sectors posting the widest losses.

The consumer staples sector was weighed down additionally by Keurig Dr Pepper (KDP 31.10, -4.04, -11.48%), which faced pressure after unveiling plans to acquire JDE Peet's for €31.85 per share in cash, valuing the deal at €15.7 billion. Following the transaction, KDP plans to separate into two publicly traded entities: a North America-focused beverage company and the world's largest stand-alone coffee business.

Meanwhile, the communication services (+0.4%) and energy (+0.3%) sectors captured modest gains.

Strong performances from a handful of mega-cap stocks prevented further losses across the major averages, though mega-cap strength as a whole diminished throughout the day, with the Vanguard Mega Cap Growth ETF (-0.2%) finishing beneath its flatline.

Nonetheless, Alphabet (GOOG 209.16, +2.44, +1.18%) captured a fresh record high, NVIDIA (NVDA 179.81, +1.82, +1.02%) traded higher ahead of its earnings report on Wednesday afternoon, and Tesla (TSLA 346.60, +6.59, +1.94%) widened its double-digit month-to-date gains.

Outside of the S&P 500, there was a notable pullback in smaller cap stocks that surged on Friday as expectations for a September rate cut increased. The Russell 2000 shed 0.8%, and the S&P Mid Cap 400 retreated 0.6%.

Homebuilders, which also benefit from a lower interest rate environment, faced pressure. The iShares U.S. Home Construction ETF finished with a 1.2% loss today after advancing an impressive 5.6% on Friday.

Overall, the market drifted sideways as rate cut expectations held steady, leaving investors reluctant to make major moves.

U.S. Treasuries began the week on a slightly lower note, with shorter tenors displaying relative weakness, while the long end also started lower, but the 30-year bond eventually recovered its opening loss. There will be ample attention on Friday's PCE inflation report, which is likely to serve as the next key catalyst for rate cut expectations.

The 2-year note yield settled up four basis points to 3.73%, the 10-year note yield settled up two basis points to 4.28%, and the 30-year note yield finished unchanged at 4.89%.

• Nasdaq Composite: +11.1% YTD
• S&P 500: +9.5% YTD
• DJIA: +6.4% YTD
• Russell 2000: +4.9% YTD
• S&P Mid Cap 400: +3.5% YTD

Reviewing today's data:

• New home sales decreased 0.6% month-over-month in July to a seasonally adjusted annual rate of 652,000 units (Briefing.com consensus 630,000) from an upwardly revised 656,000 (from 627,000) in June. On a year-over-year basis, new home sales were down 8.2%.
  • The key takeaway from the report is that the pace of sales was sluggish, owed in part to the upward revision for June. However, the affordability constraint associated with higher mortgage rates and a reduced supply of lower-priced homes was evident, as sales were lackluster month-over-month despite a drop in median and average selling prices.