Weekly Wrap

The stock market had a mixed showing this week. The S&P 500 (-0.8%) and Nasdaq Composite (-2.1%) logged declines since last Friday while the Russell continued its recent action, jumping 3.5% this week. The Dow Jones Industrial Average also higher, up 0.8%.

The underperformance of the S&P 500 and Nasdaq Composite was due to ongoing profit-taking activity in the mega cap and semiconductor spaces. The PHLX Semiconductor Index (SOX) declined 3.1% this week and the Vanguard Mega Cap Growth ETF (MGK) fell 2.8%.

This price action followed earnings results from Alphabet (GOOG) and Tesla (TSLA) that did not live up to high expectations. GOOG logged a 6.0% loss and TSLA fell 8.1%.

Dow component Visa (V) was another standout this week after stirring concerns about economic growth prospects following an acknowledgment that lower-income consumers have slowed their spending. Visa shares ultimately closed flat on the week. 

Only four sectors logged a decline -- communication services (-3.8%), information technology (-2.5%), and consumer discretionary (-2.3%) -- due to their mega cap components. Meanwhile, four sectors gained at least 1.0%. The materials (+1.4%) and utilities (+1.5%) sectors led the pack. 

A drop in Treasury yields helped the positive bias this week. The 10-yr note yield fell four basis points to 4.20% and the 2-yr note yield dropped 12 basis points to 4.39%. This price action following a slate of economic releases this week, including the June Personal Income and Spending Report, which showed some fairly steady behavior in the PCE and core-PCE price indexes on a year-over-year basis and supported the market's belief that the Fed will cut rates in September.

The market was also reacting to news that President Biden exited the 2024 presidential race and endorsed Kamala Harris for the candidacy. The news garnered muted responses in the equity and bond markets. The 10-yr note yield settled two basis points higher at 4.26% and the 2-yr note yield settled one basis point higher at 4.52%.

Monday: 

The stock market exhibited rebound action after last week's declines. Mega cap stocks and semiconductor shares led the upside action after underperforming last week, but many stocks came along for the rally. The S&P 500 settled 1.1% higher and the Invesco S&P 500 Equal Weight ETF (RSP) settled 0.8% higher. 

NVIDIA (NVDA), Meta Platforms (META), and Microsoft (MSFT) were among the influential winners on some buy-the-dip interest. With Monday's action, NVDA shares are flat so far in July, META shares are down 3.3% in July, and MSFT is 0.9% lower in July.

Market participants are also digesting news that President Biden exited the 2024 presidential race and endorsed Kamala Harris for the candidacy. The news garnered muted responses in the equity and bond markets. The 10-yr note yield settled two basis points higher at 4.26% and the 2-yr note yield settled one basis point higher at 4.52%.

There was no US economic data of note on Monday.

Tuesday:

The equity market had a mixed showing on Tuesday.  The S&P 500 (-0.2%), Nasdaq Composite (-0.1%), and Dow Jones Industrial Average (-0.1%) closed with losses after trading slightly higher or slightly lower through the entire session. The Russell 2000 continued its recent outperformance, jumping 1.1%.

Mixed responses to earnings news contributed to the mixed feeling in the market. UPS (UPS) was among the losing standouts after missing earnings estimates. NXP Semiconductors (NXPI), and Nucor (NUE) were also among the notable losers following their quarterly results.

Spotify (SPOT), Lockheed Martin (LMT), and Sherwin-Williams (SHW) were winning standouts following their reports.

The mixed disposition in the market also stemmed from some hesitation in front of the bulk of earnings season and following Monday's solid rally.

Reviewing Tuesday's economic data:

• June Existing Home Sales 3.89 mln (Briefing.com consensus 4.00 mln); Prior 4.11 mln
  • The key takeaway from the report is that sales activity slowed to levels last seen at the end of 2023, suggesting that elevated mortgage rates and low inventory are offsetting a seasonal activity boost that would be normally seen in the summer.

Wednesday:

The market fell under selling pressure. The Dow Jones Industrial Average (-1.3%), Russell 2000 (-2.1%), S&P 500 (-2.3%), and Nasdaq Composite (-3.6%) all registered solid losses. Many stocks participated in the broad retreat, but losses in mega cap stocks, semiconductor shares, and growth stocks had an outsized impact on index performance.

This price action followed quarterly results and guidance from Alphabet (GOOG) and Tesla (TSLA) that did not live up to high expectations.

Dow component Visa (V) and Lamb Weston (LW) were also among the influential laggards, stirring concerns about economic growth prospects after the former mentioned a slowdown in spending by lower-income consumers and the latter issued an FY25 earnings warning that was linked to a slowdown in global restaurant traffic.

Treasuries settled in mixed fashion.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -2.2%; Prior -3.9%
• June Adv. Intl. Trade in Goods -$96.8 bln; Prior was revised to -$99.4 bln from -$100.6 bln
• June Adv. Retail Inventories 0.7%; Prior was revised to 0.6% from 0.7%
• June Adv. Wholesale Inventories 0.2%; Prior 0.6%
• July S&P Global US Manufacturing PMI - Prelim 49.5; Prior 51.6
• July S&P Global Services PMI - Prelim 56.0; Prior 55.3
• June New Home Sales 617K (Briefing.com consensus 640K); Prior was revised to 621K from 619K
  • The key takeaway from the report is that new home sales activity remained soft in June, pressured by a lack of lower-priced homes and affordability pressures stemming from the persistence of high mortgage rates and higher selling prices.

Thursday: 

The stock market exhibited mixed action at the index level, but the vibe under the surface was positive through the entire session. Advancers led decliners by a 2-to-1 margin at the NYSE and by a 3-to-2 margin at the Nasdaq.

The S&P 500 (-0.5%) and Nasdaq Composite (-0.9%) traded above and below their prior closing levels, following the fickle price action in mega cap shares.

The overall upside bias stemmed from buy-the-dip interest after yesterday's solid sell off.

Outsized moves in either direction were reserved for names with specific catalysts. Honeywell (HON) and Ford Motor (F) were losing standouts after reporting earnings news. Meanwhile, IBM (IBM) and ServiceNow (NOW) were winning standouts after reporting earnings.

Treasuries were reacting to the Thursday morning's economic releases, which were in-line with the market's soft landing expectation and also acted as support for equities. Also, the $44 billion 7-yr note auction met strong demand.

Reviewing Thursday's economic data:

• Q2 GDP-Adv. 2.8% (Briefing.com consensus 1.9%); Prior 1.4%; Q2 Chain Deflator-Adv. 2.3% (Briefing.com consensus 2.6%); Prior 3.1%
  • The key takeaway from the report is that it didn't show any breakdown in consumer spending. In fact, consumer spending growth accelerated, increasing 2.3% on the heels of a 1.5% increase in the first quarter.
• Weekly Initial Claims 235K (Briefing.com consensus 240K); Prior was revised to 245K from 243K; Weekly Continuing Claims 1.851 mln; Prior was revised to 1.860 mln from 1.867 mln
  • The key takeaway from the report is that there hasn't been an alarming jump in initial claims -- a leading indicator -- to even higher levels; therefore, a conclusion will be drawn that the labor market is seeing some normal slowing as opposed to a rapid deterioration.
• June Durable Orders -6.6% (Briefing.com consensus 0.4%); Prior 0.1%; June Durable Goods -ex transportation 0.5% (Briefing.com consensus 0.2%); Prior -0.1%
  • The key takeaway from the report is that the weakness was driven by a large drop in nondefense aircraft and parts orders, which are volatile. An added takeaway is that business spending in June was quite solid, evidenced by the 1.0% increase in new orders for nondefense capital goods excluding aircraft.

Friday: 

Stocks had a solid showing. The major indices exhibited some choppiness, but maintained gains through the session. The upside bias was driven by positive responses to earnings news, a drop in market rates, and some pleasing economic data.

In earnings news, 3M (MMM), Mohawk (MHK), Charter Comm (CHTR), and Norfolk Southern (NSC) were among the winning standouts. Meanwhile, Dexcom (DXCM) logged the largest decline in the S&P 500 by a big margin after disappointing FY24 revenue guidance.

Reviewing Friday's economic data:

• June Personal Income 0.2% (Briefing.com consensus 0.4%); Prior was revised to 0.4% from 0.5%
• June Personal Spending 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.4% from 0.2%
• June PCE Prices 0.1% (Briefing.com consensus 0.1%); Prior 0.0%, June PCE Prices - Core 0.2% (Briefing.com consensus 0.2%); Prior 0.1%
  • The key takeaway from the report is that the price indexes didn't worsen on a year-over-year basis (i.e., move higher relative to the prior month). Consequently, they didn't give the market any reason to think the Fed will not cut rates at its September FOMC meeting considering comments from Fed officials, who knew where the May PCE price readings stood, have been teeing up that possibility.
• July Univ. of Michigan Consumer Sentiment - Final 66.4 (Briefing.com consensus 66.0); Prior 66.0
  • The key takeaway from the report is that there weren't any real notable changes in consumer sentiment, which has been rightfully described as guarded as consumers continue to deal with inflation, election uncertainty, higher interest rates, and some softening in the labor market.