Closing Market Summary: Discretionary Sector Leads Stocks Higher
The stock market continued its strong start to the week with a broad-based Tuesday rally that sent the S&P 500 higher by 0.5%. Nine of ten sectors registered gains while the benchmark index extended its week-to-date advance to 1.4%.
Equities received an opening boost from a pair of economic data points that crossed the wires this morning. An in-line CPI report suggested inflationary pressures remain contained, while a better than expected Housing Starts report underpinned homebuilders and the discretionary sector.
Fittingly, the consumer discretionary space (+0.8%) surged out of the gate and spent the entire session among the leaders. Homebuilders rallied following the upbeat data and better than expected earnings from Home Depot (HD 88.23, +4.64). The Dow component jumped 5.6%, while the iShares Dow Jones US Home Construction ETF (ITB 23.99, +0.56) advanced 2.4%.
Retail stocks also played a part in the outperformance of the discretionary sector after Dick's Sporting Goods (DKS 44.21, +0.70) and Urban Outfitters (URBN 38.59, +1.67) beat their earnings estimates. The SPDR S&P Retail ETF (XRT 87.05, +1.11) rose 1.3%.
While the influential discretionary sector displayed broad strength, other heavily-weighted groups were a bit more mixed. Technology (+0.7%) outperformed, while financials (+0.2%) and industrials (+0.2%) lagged.
The top-weighted sector—technology—received support from chipmakers. The PHLX Semiconductor Index recaptured its 50-day moving average and added 0.6% with all but five components posting gains. Meanwhile, most large cap tech components were limited to modest gains, but shares of Apple (AAPL 100.53, +1.37) climbed to a fresh all-time high.
Elsewhere, the top-weighted countercyclical sector—health care (+0.7%)—trailed the broader market for the majority of the session, but spiked during afternoon action in reaction to reports from the Wall Street Journal, indicating Salix Pharmaceuticals (SLXP 160.80, +21.63) was approached by Allergan (AGN 161.82, +6.21) about a potential acquisition. Shares of SLXP ended higher by 15.5%, while the iShares Nasdaq Biotechnology ETF (IBB 267.23, +1.02) tacked on 0.4% after showing intraday weakness.
Similar to health care, the utilities sector (+1.2%) outperformed, while the remaining two defensively-oriented groups—consumer staples (+0.2%) and telecom services (-0.3%)—lagged.
Treasuries began the day with solid gains, but spent the session in a steady retreat. The 10-yr note shed one tick with its yield ending at 2.40%.
Participation was well below average with fewer than 550 million shares changing hands at the NYSE.
Economic data was limited to CPI, and Housing Starts/Building Permits:Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while the minutes from the latest FOMC policy meeting will cross the wires at 14:00 ET.
- Consumer prices increased 0.1% in July following a 0.3% increase in June, which matched the consensus
- As expected from the July PPI report, energy prices fell 0.3% in July after increasing 1.6% in June
- Food prices accelerated, up 0.4% in July from a 0.1% increase in June
- Food at home prices, typically from grocery stores, increased 0.7%, which was the largest increase since August 2011
- Excluding food and energy, core CPI increased 0.1% for a second consecutive month in July, which is what the consensus expected
- Housing starts increased 15.7% in July to 1.093 million from an upwardly revised 945,000 (from 893,000) in June, while the consensus expected an increase to 964,000
- The big news out of the housing data was an 8.3% increase (to 656,0000) in single-family construction after declines were observed in May and June
- Building permits rose to a seasonally adjusted annualized rate of 1.052 million in July versus a revised 973K for June, while the consensus expected an increase to 1.001 million
- Nasdaq Composite +8.4% YTD
- S&P 500 +7.2% YTD
- Dow Jones Industrial Average +2.1% YTD
- Russell 2000 -0.1% YTD