Closing Stock Market SummaryToday's trade featured an orderly stock sell off with mega caps and growth stocks pacing broad based losses. The catalyst that drove selling interest was a jump in market rates, which gave inventors an excuse to take some money off the table in a market that is overbought on a short-term basis.
Market rates had been moving lower, though, in overnight action despite the news that Fitch Ratings downgraded its U.S. credit rating to AA+ from AAA. The downgrade reflected the expected fiscal deterioration over the next three years, growing government debt, and erosion of governance related to peers.
The 2-yr note yield and 10-yr note yield fell to 4.84% and 4.01%, respectively, at their overnight lows. Treasury yields started to climb, however, immediately after the cash open, turning sharply higher around 8:15 a.m. ET with the release of the ADP Employment Change Report. The jump in Treasury yields briefly sent the 10-yr yield past its high from July (4.094%) to a level not seen since early November.
Ultimately, yields backpedaled from their highs. The 2-yr note yield settled two basis points lower at 4.89% and the 10-yr note yield rose three basis points to 4.08%.
Pressured by the rising rates, mega cap stocks saw disproportionate selling interest, which led to a 2.1% loss in the Vanguard Mega Cap Growth ETF (MGK).
Overall, outsized moves were reserved for stocks that reported earnings since yesterday's close. e.l.f Beauty (ELF 133.19, +16.69, +14.3%) was a big winner in that respect after reporting better than expected earnings and raising guidance. On the flip side, shares of Generac (GNRC 115.95, -37.43, -24.4%) are plunged after it missed on revenue estimates and lowered net income margin guidance.
The defensive-oriented S&P 500 consumer staples (+0.3%) and health care (+0.1%) sectors were alone in the positive territory at the close. The information technology sector (-2.6%), meanwhile, sank to the bottom of the pack, pressured by its weak mega cap components and a huge loss in SolarEdge Technologies (SEDG 195.51, -43.96, -18.4%) after it reported earnings.
Weak semiconductor constituents were also a drag on the info tech sector. AMD (AMD 109.35, -8.25, -7.0%) was a losing standout, sinking after its earnings report. The PHLX Semiconductor Index dropped x%.
The ADP report that coincided with a jump in market rates showed that an estimated 324,000 jobs were added to private-sector payrolls in July (consensus 185,000) following a downwardly revised 455,000 (from 497,000) in June. This report supports the idea that the Fed may be apt to keep rates higher for longer. As a reminder, the July Employment Situation Report will be released on Friday.
- Nasdaq Composite: +33.5% YTD
- S&P 500: +17.6% YTD
- Russell 2000: +11.7% YTD
- S&P Midcap 400: +10.8% YTD
- Dow Jones Industrial Average: +6.4% YTD
Reviewing today's economic data:
- The weekly MBA Mortgage Applications Index fell 3.0% with purchase applications falling 3.0% and refinance applications also falling 3.0%
- The ADP Employment Change showed a 324,000 increase in private sector payrolls in July (consensus 185,000) following a revised 455,000 increase in June (from 497,000).
- The weekly EIA crude oil inventories showed a draw of 17.1 million barrels after last week's draw of 600,000 barrels.
The economic calendar on Thursday will include:
- 8:30 a.m. ET: Q2 Productivity-Prelim (consensus 1.7%; prior -2.1%) and Q2 Unit Labor Costs-Prelim (consensus 2.7%; prior 4.2%); Weekly initial (consensus 225,000; prior 221,000) and continuing (prior 1.690 million) jobless claims
- 9:45 a.m. ET: July S&P Global US Services PMI - Final (prior 54.4)
- 10:00 a.m. ET: July ISM Non-Manufacturing Index consensus 53.0%; prior 53.9%); June Factory Orders (Bconsensus 2.0%; prior 0.3%)
- 10:30 a.m. ET: Weekly EIA Natural Gas Inventories (prior +16 bcf)