Closing Stock Market SummaryThe stock market opened on a soft note before a midmorning rally recouped early losses. The bounce had limited staying power, as the major indices fell sharply with about an hour left in the session before moving sideways into the close. The late afternoon selling efforts coincided with the S&P 500 testing its 200-day moving average (4,326.11) at its intraday high (4,325.26), where it found resistance and sold off after that.
The midmorning rally was fueled by retailers trading up in solidarity with Dow components Home Depot (HD 327.38, +12.77, +4.1%) and Walmart (WMT 139.37, +6.77, +5.1%) after the companies reported better-than-expected results for Q2. The SPDR S&P Retail ETF (XRT) closed up 4.0% on the day.
The S&P 500 consumer discretionary (+1.1%) and consumer staples (+1.2%) sectors closed at the top of the leaderboard thanks to gains in their aforementioned components.
Also, highly shorted stocks like GameStop (GME 42.19, +2.51, +6.3%), Blue Apron (APRN 5.38, +0.75, +16.2%) and Bed Bath and Beyond (BBBY 20.65, +4.65, +29.1%) made big upside moves today. The size of the moves points to a significant short-covering element in this session's rally.
Weakness today was due to lagging mega caps with the Vanguard Mega Cap Growth ETF (MGK) closing down 0.1% versus a 0.3% gain in the Invesco S&P 500 Equal Weight ETF (RSP) and a 0.2% gain in the S&P 500.
Semiconductor related stocks were another specific area of weakness with the PHLX Semiconductor Index (SOX) closing down 1.0%. These stocks also brought down the performance of the information technology sector (-0.3%), one of the top laggards today.
The energy sector (-0.3%) was another top laggard amid falling oil prices. WTI fell 3.4% to $86.28/bbl. Unleaded gasoline futures fell 2.1% to $2.89/gal.
Separately, Treasury yields made upside moves today. The 2-yr note yield rose six basis points this session to 3.24% while the 10-yr note yield rose three basis points to 2.82%.
Ahead of tomorrow's open, Lowe's (LOW), Target (TGT), and TJX (TJX) are all set to report earnings.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 0.2%)
- 8:30 ET: July Retail Sales (consensus 0.2%; prior 1.0%) and Retail Sales ex-auto (consensus 0.1%; prior 1.0%)
- 10:00 ET: June Business Inventories (consensus 1.5%; prior 1.4%)
- 10:30 ET: Weekly crude oil inventories (prior +5.45 mln)
- 14:00 ET: July FOMC Minutes
Reviewing today's data:
- Housing starts in July decreased 9.6% month-over-month to a seasonally adjusted annual rate of 1.446 million (consensus 1.543 million) from June's upwardly revised rate of 1.696 million (from 1.559 million) while building permits -- a leading indicator -- were down 1.3% month-over-month to a seasonally adjusted annual rate of 1.674 million ( consensus 1.647 million) from June's upwardly revised rate of 1.696 million (from 1.685 million).
- For the second month in a row, the headline miss has been softened by upward revisions to last month's figures. This is masking the fact that housing starts are now at their lowest level since early 2021 while building permits are also receding from a high that was seen earlier this year.
- Total industrial production increased 0.6% month-over-month in July ( consensus 0.3%) after an upwardly revised flat reading in June (from -0.2%). The capacity utilization rate increased to 80.3% (consensus 80.2%) from a downwardly revised 79.9% (from 80.0%) in June.
- The key takeaway from the report is that total production growth was supported by a solid increase in motor vehicle assemblies, which is fueling hopes that the semiconductor shortage is easing its grip on auto production.
Dow Jones Industrial Average: -6.0% YTD
S&P 400: -7.3% YTD
S&P 500: -9.7% YTD
Russell 2000: -10.0% YTD
Nasdaq Composite: -16.3% YTD