The market's winning streak was broken today. The market initially moved higher before upside momentum slowly dissipated. The S&P 500 and Dow Jones Industrial Average both closed with a loss near their worst levels of the day while the Nasdaq eked out a slim
gain. The muted price action was due to a lack of conviction on either side of the tape.
In general, big moves were reserved for individual stocks with catalysts. Retailers Dollar
General (DG 138.50,
-19.16, -12.2%) and Five
Below (FIVE 171.96,
-10.99, -6.0%) sank after reporting quarterly results that featured below-consensus guidance. CrowdStrike (CRWD 163.03,
+13.85, +9.3%) and Dow component Salesforce (CRM 221.46,
+6.42, +3.0%), meanwhile, registered sizable gains after their earnings reports.
Relative strength in mega cap stocks offered a measure of support to the broader market. The Vanguard Mega Cap Growth ETF (MGK) logged a 0.1% gain while the Invesco S&P 500 Equal Weight ETF (RSP) fell 0.4% and the market-cap weighted S&P 500 fell 0.2%.
Seven of the 11 S&P 500 sectors registered a loss with health care (-1.2%) and utilities (-1.0%) showing the steepest declines. The consumer discretionary sector (+0.5%) saw the biggest gain, bolstered by a nice move in Amazon.com (AMZN 138.01,
+2.94, +2.2%).
Market participants were digesting some otherwise pleasing data that corroborated the understanding that the U.S. economy is not tracking currently at a hard landing pace.
Specifically, initial jobless claims - a leading indicator -- were just 228,000 for the week ending August 26, and personal spending increased at a healthy 0.8% clip in July. The PCE Price Index and core-PCE Price Index were both up 0.2%, and although that
translated into an uptick in their year-over-year readings to 3.3% and 4.2%, respectively, the news was tolerated well because that was exactly what was expected ahead of the report.
Expectations for additional rate hikes before the end of the year were little changed after this morning's data. The probability of a 25 basis points rate hike in November is 45.4% now versus 48.9% before the data, according to the CME FedWatch Tool.
On a related note, Atlanta Fed President Bostic (2024 FOMC voter) said that he feels the Fed's monetary policy is appropriately restrictive, but that doesn't mean he is in favor of easing anytime soon.
Treasuries had a muted response to this morning's data, but drew some modest selling interest during the cash session. The 2-yr note yield fell two basis points to 4.86% and the 10-yr note yield fell three basis points to 4.09%.
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Nasdaq Composite: +34.1% YTD
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S&P 500: +17.4% YTD
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Russell 2000: +8.9% YTD
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S&P Midcap 400: +7.9% YTD
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Dow Jones Industrial Average: +4.8% YTD
Reviewing today's economic data:
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Weekly Initial Claims 175K vs consensus of 235K; Last Week was revised to 232K from 230K
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Weekly Continuing Claims 160K; Last Week was revised to 1.697 mln from 1.702 mln
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The key takeaway from the report is that initial claims -- a leading indicator -- continue to run at levels that are indicative of a tight labor market that goes hand-in-hand with an economy that is definitely not in a hard-landing pattern.
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July Personal Income 0.3% vs consensus of 0.3%; June was 0.3%
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July Personal Spending 0.8% vs consensus of 0.7%; June was revised to 0.6% from 0.5%
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July PCE Prices 0.2% vs consensus of 0.2%; June was 0.2%
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July PCE Prices - Core 0.2% vs consensus of 0.2%; June was 0.2%
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The key takeaway from the report would have to be the uptick in the year-over-year inflation readings. They weren't of the eye-popping variety; however, they should catch the Fed's eye as a basis not to cut rates anytime soon.
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August Chicago PMI 48.7 vs consensus of 45.0; July was 42.8
Looking ahead to Friday, market participants will receive the following economic data:
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8:30 ET: August Nonfarm Payrolls (consensus 175,000; prior 187,000), Nonfarm Private Payrolls (consensus 160,000; prior 172,000), Unemployment Rate (consensus 3.6%; prior 3.5%), Average Hourly Earnings (consensus 0.3%; prior 0.4%), and Average Workweek (consensus
34.3; prior 34.3)
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9:45 ET: Final August S&P Global U.S. Manufacturing PMI (prior 47.0)
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10:00 ET: July Construction Spending (consensus 0.6%; prior 0.5%) and August ISM Manufacturing Index (consensus 46.7%; prior 46.4%)